Let The Markets Decide!
Ok, let’s! Well it appears that the markets have decided that if you remove all the rules and regulations from the way in which American corporations can operate, some corporations will eventually operate with myopic gluttony, blow off time tested risk aversion strategies in the pursuit of unreasonable profit margins and the American economy will implode. Dude, lesson TOTALLY learned.
The shocking near collapse of Bear Stearns this week is a reminder that government regulations on corporations are not handcuffs meant to impose needless restrictions on free enterprise. Government regulations are meant to protect corporations from the single most dangerous threat to themselves: greed.
The Federal Reserve is now involved in the Faustian task of recklessly bailing out all the greedy assholes that could not restrain themselves from gorging on poisonous sub-prime loans and cheap cash bundled up by the billions in unregulated hedge funds.
Why can’t the Fed let Bear Stearns die in the fiery wreck of its own stupidity and hubris, survival of the fittest style? Well, first of all, the Federal Reserve and the Bush administration have shown their true colors during this mess by revealing that they only care about letting the markets decide when the bulls are running, not when the markets are deciding to exact punishment on bad corporate actors. The other reason is the only acceptable one: If this “venerable” old institution collapses, it could take the entire American economy down with it. And as the American economy goes, so goes the rest of the world.
Dump your stock portfolio first thing Monday morning.
xok
March 15th, 2008 at 10:33 pm
Preach, baby!
March 16th, 2008 at 12:01 am
You see this is what I’m talking about…
Something strange is happening to Kay - the morning after almost starting a bar brawl, she texts me from a plane about something she’s reading in the Harvard Business Review. Then, after posting about “Amy” here, she posts about economic theory. In our last meeting, she used the words “dovetail,” “solutions” “monetize” (like, 20 times), “synergy” (I think she was kidding with that one) and “smash the fucking paradigm.”
So if the whole “mogul” thing doesn’t work out, Kay can always get a job as a political or economic analyst/talking head on like, the FUSE Network or something.
Also, I can just envision the blank stares from the under-14 crowd just looking for Miley B-roll. Mike and I appreciated the post though…
xoxo - your wife
March 16th, 2008 at 2:27 am
same is happening here in India too!! These assholes have decided to take the entire economy down with them…
March 16th, 2008 at 7:48 am
Accountability. No…….. but that was assumed from the beginning.
“Dump your stock portfolio first thing Monday morning”
LOL. Now is the time to load up on (ridiculously) undervalued stocks!!!!! Now is the time for really low bids on real estate. Is this the land of opportunity…..or what?????
The investing landscape is even than after the 2000 tech bubble blowout or 911. Show me the money!
March 16th, 2008 at 7:50 am
Rule #1- proofread what you post
Rule #2- don’t post until after your first cup of coffee
The investing landscape is better than after the 2000 tech bubble blowout or 911. Show me the money!
March 16th, 2008 at 9:49 am
Dr. Rickles, this is where you and I disagree. Undervalued or not (and we could argue about that as well), the market has quite a way to go before we see the bottom. While one can find a bargain in theory, that way thinking doesn’t apply in a bear market b/c investors are basing their choices on emotion. That is not an environment for my hard earned $$$. I will definitely see you at the fire sale this summer, though! As for real estate, prices are dropping like a stone for sure, but here in LA county the situation is far from corrected. I’m sitting this round out, mate. Buy art!
Do I detect some condescension in your tone, btw? I stand by every word. As you know, I started dumping my positions in Aug ‘07 and now my retirement and savings portfolios are %90 cashed out.
March 16th, 2008 at 11:12 am
Remember when the movie “Wall Street” was meant as a warning to everyone? Does anyone remember the movie?
We’re human, Kay. We never want to learn anything. We had busts and booms throughout the free-wheeling Nineteenth Century. For some reason we had to try it again and - shock! - same thing happened. Our present crazy tail-wagging-dog process of letting arbitrary stock values guide corporate decisions is finally producing fruit. The sad thing is, at some point after we get this mess cleaned up we’ll collectively want to do it all over again.
History can make one cynical.
March 16th, 2008 at 1:17 pm
Bravo Kay! Well said. Here’s another thought which has elicited some disagreement already. It certainly looks to this economically challenged observer (me) that the Fed is getting into a zone of statistical overcontrol. You can hardly turn on the tv without seeing Mr. Bernanke. This constant adjustment of interest rates, the constant, shall we say, meddling does not project an air of confidence. Not really. And if this economy needs anything, it needs to be portrayed as strong and solid, and those “in charge” need to be seen as totally confident about that. You know what I’m getting at here. Besides, let’s hope they don’t fix it ’till it’s broken.
March 16th, 2008 at 2:44 pm
Dear Mrs Eisenstein,
I remember quite well our chat at Kiva and was amazed and very impressed by what you did. Your actions took the courage of your convictions….and you made the right move (especially with respect to real estate).
Where we disagree is on your attempt to time the market (waiting until the bottom). The point of lowest value will differ from stock to stock, and real estate market to market. I don’t care if I buy a stock and it goes down before rising in value. I would be concerned if I was a daytrader or in a position where I could not afford to lose any money. My feeling is that if the stock is solid and obviously undervalued, why not add it to the portfolio if it looks like a good value? I don’t need to time the low…..and have already learned from MANY attempts that I cannot time the low.
Re the real estate market, sad but true, there are a lot of great deals available. Taking into consideration the particulars (why the person is selling the house, how much they paid for the house, foreclosure, etc.), it’s possible to all but steal a property. If I did not already have 3 houses (and probably soon a fourth), I’d definitely be investing in real estate. However, I’d only buy after a lowball and have no absolutely no doubt I could find an absolutely amazing bargain.
The key thing is to remember (as if I need to tell you this) is the cyclical nature of the stock and real estate markets. One needs to factor in valuation (obviously the trickiest part, especially after a bubble) and now is a good time to invest if you think there is a bargain (bottom fishing anyone?). Yes, in a bear market people base their choices on emotions (and often behave irrationally). Their pain can be your gain.
Am I jumping in 100% on individual stocks right now? No. I have maxed my month-to-month investment into mutuals….but am very wary about individual stock picks and am playing it quite conservative. But……there is some serious irrational shit going on (cattle calls) and I cannot ignore the temptation to partake of the festivities.
March 16th, 2008 at 11:09 pm
Dr. Rickles -
If you were an individual stock OR a mutual fund, I would short you.
xok
March 17th, 2008 at 4:01 am
JP Morgan is buying Bear Stearns for $2/share. Bear Stearns closed Friday at $30 a share. At their peak, the shares traded at $159.36.
Great bottom fishing.
The glass is not half empty, it is half full.
Is this the land of opportunity……………………………………….or what?
Cheers
March 18th, 2008 at 2:02 pm
Hmmmmmm…..anyone dumping their shares Monday would have missed the its biggest one-day point gain in 5½ years. Now I’m going to keep my eye on the mortgage rates. I’m liking what I’m seeing but fully expect another Bear Stearns is out there.
March 18th, 2008 at 11:44 pm
With today’s “rally” I took the opportunity to sell more positions. If it turns out that today is a harbinger of good times ahead, then nobody will be happier than I to have been wrong and I will jump back in. I don’t think I’m wrong, though.
March 20th, 2008 at 1:30 pm
Whew it’s been a virtual blizzard of trading this week! I was stuck in a conference Mon-Wed and missed out on all of the action. This made me very sad, but today gave me the opportunity to dump some stocks, so my mood has improved some. There’s money to be made on the way up and the way down, but I much prefer making it on the way up!
Kay, I admit it. You were dead nuts on target last August. I recall thinking one dark day in January that you must be on cloud 9.
These precipitous drops in stock values do make me itch to buy more. I’m incorrigible.