My view: more doom and gloom in the markets
- If you are ‘too big to fail,’ you are ‘too big to go unregulated.’
- The bailout plans being discussed now are all *terrible*
- they reward companies that were recklessly over-leveraged
- they reward homeowners who were recklessly over-leveraged
- they penalize any people or companies that did not participate in the reckless borrow & spend tactics
- they substitute lack of accountability in the private sector for lack of accountability in the public sector
- Short sellers provide accountability to companies – they aren’t the problem, they are part of the solution
- As we focus on government bailouts, we are missing the fact that Bank of America’s has put US tax payers on the hook (through FDIC insurance) for a catastrophe in Merrill Lynch’s portfolio
- This bailout is going to pale in comparison to what happens when there is a run on the mutual funds. More on this later, but look up “embedded tax liability” and you’ll get a peek at what will almost certainly happen as baby boomers reverse the trend from net contributions to net disbursements in mutual funds
- To all those who repeat “focus on asset allocation because markets always go up in the long run”: don’t forget that the “long run” has meant 25 years in at least one case in our history
- Neither Obama nor McCain or any other political leader has a clue what do right now
Unfortunately, I do not have a solution to these incredible problems. I do believe that acknowledging these problems sooner rather than later is critical in containing the damage of twenty+ years of living beyond our means as a country.
Have a good day!!