Sunday, June 24, 2007


Ok. I admit it. I'm amazed by Hollywood.

How exactly does the action movie star *know* that the faint whining in the distance is really an 18 wheeler, out of control, about to crash into the side of a lingerie store that he and his fiancee are casually shopping in.....or that the glint of light across the street on the rooftop is actually the reflection of a careless assasins rifle scope?

It seems like the first couple of times you tackled your friends and family taking them out of "harm's way" in a false alarm it would start to get *really* annoying...."oops, sorry" as you help your loved one to her feet, dust yourselves off and sheepishly try to right the wunderbra display.

Ok...with all those caveats....


I don't know how much or how well the mainstream media is reporting or explaining what is going on in the mortgage credit markets right here is my 10 second synopsis:

Lots of dudes have borrowed lots of money in a leverage way.
To borrow that money they had to have "collateral".
They pledged as collateral something that doesn't trade in the open market and is hard to appropriately value.
Chances are, if the true value were known, they would have to come up with extra money for collateral that they don't have.
But, luckily, they haven't been forced to admit what the true value is because these things don't trade very often. They can continue to pretend they are solvent.
However, there is a *chance* that someone could be forced to sell SOON and admit the true value.

The result will be a wave of repricings rippling through an overleveraged market....(yeah, there really isn't anything new out there, is there?)

So, what's the chances that I'll be sheepishly helping you to your feet and straightening your clothes after another false alarm?

Who knows.

However, this is really what I've been predicting since starting the blog....a credit crunch due to malinvestment in absurdly overpriced residential real estate leads to a big-time credit crunch and/or big inflation as the powers that be try to save the market.

If the "powers that be" manage to paper over the damage, it's just a stop-gap. The bill has to be paid by someone/somewhere....and it's much to big to be done without damaging someone somewhere.....if the damn doesn't break right here, right now, i'd be VERY suprised to see us get all the way to the end of the year so all these overpaid hacks can get their ridiculous bonus packages.

It will either be taken on the chin by the private sector - the very people that have been profiting grossly from this very boom, or it will be paid for with tax dollars in an outright bailout, or in a stealthtax by the Federal Reserve printing more money for the debacle and inflating away all the wealth that you've accumulated with your hard work up until now.

Can you guess what I'm predicting? (hint: see my earlier post entitled 'privatizing benefits and socializing risk').

Isn't it Great?

Now, if only being "right" paid as well as being "smart" and just gorging oneself at the trough until they take it away.....sigh...I really didn't learn *anything* from the dot-com debacle, did I?


No comments: