Political Fear and Loathing on Wall Street
September 24th, 2008 Categories: Investing, Random
There is so much involved with all the ‘economic crisis’ news…trying to analyze, rationalize and otherwise debate it all is something I’ll leave to the pundits and the history books.
Between all the yelling and screaming three points are compelling to me.
1. The FBI is investigating every company that is ripe for or has already received a ‘Wall Street Welfare Check’ (aka bailout), for fraud.
Whats does this mean to me? The politicians have called in the hounds to flush out a few scapegoats. Considering there is a very fine line between a ‘high risk investment’ and ‘fraud’, there is a lot of chalk dust being kicked up right now, blurring those lines. Yesterdays ‘investment’ looks to become tomorrows ‘fraudulent transaction’.
Politicians, never afraid to insert sharp objects into the dorsal side of public adversity (even if it was very recently a friendly opportunity), appear to be on a witch hunt, ready to burn the C-Suite executives that ran their personal beltway lobbyist cash machine Company’s on Wall Street at the stake in an epic public spectacle.
Seems to me that Washington will blame this entire mess on the ‘monsters’ they helped create and took gobs of cash from (legally of course), still profit from it all and then claim they did everyone a favor by cauterizing losses now instead of letting the bleeding continue at a far higher cost.
2. The S.E.C. has banned short selling on over 1000 different financial institutions.
Shorting stock is the equivalent of betting that a companies stock price will fall, and profiting from that fall, should it happen. Short selling is the reason you hear people say that you can make money when the market is going up and down. Heavy ’shorting’ tends to drive down the price, value and thus liquidity of a company.
Apparently a vast majority of the the recent ’shorts’ came from overseas, most specifically London’s and Dubai’s markets. London has also initiated a similar ban. Is it possible that there is a case of ‘economic terrorism’ here? I’m not usually one for conspiracy theories, and usually brush off such notions for what they’re worth, but this one has me thinking…it is plausible.
The government could never lend credibility to this theory even if it were true or our entire economy would sink faster than the Titanic. Consumers would withdraw all their money from financial institutions, go all 2nd Amendment and bear arms, looting and rioting would probably ensue.
A more likely explanation lies in the fact that if the Government is going to write a check to bailout a company, they don’t want anyone ‘riding down’ their investment any further. In any case, banning a practice that’s been part of a capitalistic ‘free’ market almost since its inception is…interesting?
3. Warren Buffet is back in the game. He made a $5B investment in Goldman Sachs which would lend one to believe that one of history’s savviest, fundamentally sound investors believes the market is at bottom or damn near close.
The deal was a sweet one for Berkshire Hathaway…Buffett paid a low price, got a high return (yield) and insulated it all with attractive warrants that are already well in the money, all for Wall Streets strongest name, Goldman Sachs. Maybe the man with a name and credibility almost as big as his wallet can infuse some much needed confidence into our battered economy.
Whatever happens from here forward, getcha popcorn ready…it’s going to be great theater.
Aside: Someone better watch Lou Dobbs before he goes postal and starts ‘offing’ politicians. Lou’s pretty pissed about all this.
Sphere: Related Content
Add New Comment
Viewing 3 Comments
Thanks. Your comment is awaiting approval by a moderator.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Do you already have an account? Log in and claim this comment.
Add New Comment