Sunday, November 23, 2008

What the hell happened here

Well, I have to admit that I wasn't paying attention to what was going on in the finance world for some very good reasons that I'll get into at some point, as they are apropos to the subject. So, during the past year, I've been reading like mad to see what was what and to catch up with the economy. As I got into the details, I kept thinking what idiot thought of this. Oh, that is crazy. Sheesh, folks, how did casino capitalism get so entrenched?

I quit feeling behind, and ignorant, when the golden boys of Goldman Sachs (and Citi and ...) took a hit, and analysis started to look for the culprits behind the mess. At that point, I was vindicated, again, for several reasons that will be discussed. Who said that those guys were the best and brightest?

Then, of late CitiGroup is under the gun. If my memory is correct, Weill (their CEO until 2003, the King of Capital) was instrumental in getting the leveraging game going again (yes, after the 1929 crash, leveraging was verboten - Weill argued successfully for a relaxation). So, that Citi wrestles with their current problem might just be poetic justice.

Let's look at some issues, that will have to be reviewed further, with a few comments now.
  • - Where did the idea come in that the market (as defined by those instruments associated with the DOW - Modigliani aside) was the key economic indicator? That is, with the expenditures of all this human and computer labor, CBOE, and journalistic interest, that is a whole lot of ado about not much. What does Citi care that they're at $3? Oh yes, Weill, and others, took a pocket book hit. An earlier post looked at the irony of trying to use a random walk as the basis for future certainty. Idiotic, to the extreme.
  • - How is it that we have the consumer side as a very large factor in the economic equation (macro), yet we set up the whole game so that the majority only fall into an endless indentured servant state? Yes, isn't that stupid? At the same time, we let the fat cat pockets suck the life out of all but a fraction of a percent of the rest. Something stinks here. Consumer Reports had an ad (USA Today, 11/24/2008) stating that consumer debt is near $1T (yes, trillion - see FRB numbers for Sept 2008). How can there be a continuation of the manic rate of consumer expenditure with that heavy load?
  • - How is it that about 100 people can account for the extraction of $21B from the market into their pockets for the past 5 years (WSJ article)? At the same time, a very many were essentially without even the basics.

08/01/2013 -- Ben cannot unwind or taper downhe has too many Doves. We'll have to get back to the king thing (yes, the divine rights of the CEO, new royalty, in other words) and dampening of these types by a new outlook (Magna-Carta'√≠sh).

04/03/2011 -- Need to look at some background. Too, tranche and trash.

04/01/2011 -- The last man wants the old days back.

01/27/2010 -- It's really ca-pital-sino.

09/15/2009 -- Lessons, one year after Lehman. Also, Time on culprits.

08/17/2009 -- Books on the credit crunch. This crunch involved "macroeconomic imbalances, greedy and incompetent bankers, and fraudulent American homebuyers."

08/17/2009 -- As promised, FEDaerated is here.

07/31/2009 -- Let's see, 5,000 got over $1M for services rendered. Well, that's probably a sign of being a best-and-brightest, at least to certain eyes; it's called rolling-in-the-dough.

Now, this can be used to illustrate how the game it to fill the pockets of a small set to an exorbitant amount. Does the game need to be that way? Hell no. We'll look at that some more.

06/17/2009 -- Michael Milken says that structure counts (see WSJ article). Remember, the theme here is that a lot of securitization is bunk, many times. Sheesh, talk about a perpetual motion machine, always moving monies from the pockets of the hapless to that of the fat cats.

06/07/2009 -- Say what?

04/17/2009 -- Minsky and the facts of ephemeral value are a couple of topics on the list.

03/25/2009 -- Rhetoric can be fun, but we have to get into these issues with depth and technicalities.

03/11/2009 -- We also need to look at accounting's role messing up affairs.

01/18/2009 - We even need to look at why we need finance.

12/18/2008 -- Leveraging, in and of itself, is not bad.

12/01/2008 -- We need to learn what we might be taught about money by Islamic Finance among other things.

Modified: 08/01/2013

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