On Cubism and Diamonds

Ballplayers.  Modern art.  I had a lack of understanding of both. 

 

This Red Sox-Rays series spotlighted the perversions.  Bad baseball.  The monstrosity last night that went until midnight.  The monstrosity last Saturday, with bad umpires.  “Good at-bats,” according to Chip Caray.  Where the hell did he grow up?  His dad never would call these things good at-bats.  Or his grandfather. 

 

The Ivy League comes to baseball, for profit.  People trying to turn a game into a science.  There was such a thing as over-educated.  The new general managers were as bad as the skipper who over-managed, never ready for extra innings.  Overpaid and now over paying. 

 

The State of the Union:  When there were no other for-profit businesses left.  Kids who were in it just for money.  Owners, agents, the adults just here for money.  For the money.  George Bush had served the game about the time of this revolution to modern art. 

 

Hitting!  The game was supposed to be about hits.  Not walks.  These games were not supposed to take 5 hours.  These people were killing the game.  Quality starts, my eye!  I wished these guys would try some speed, not just performence enhancement drugs. 

 

Could we get a health care plan for baseball, Obama?  McCain?  For everyone.  Speaking of the negative campaign season, Andy Warhol comes to baseball and it was lasting more than 15 minutes.  A lot more than 15 minutes. 

  

Where have your gone, Joe DiMaggio?   Or those who actually played for the love of the game!  Hall of Famers, the Grand Masters, spinning in their graves over what the Theo Epsteins had done to the baseball.  They had both become the same, baseball and its players, and  modern art.  The prices paid.  And no one had a clue.  

Survival of the Fittest

I once heard a story of a super salesman who tried to get an older relative to buy a pair of gently used shoes at the Salvation Army. 

 

This week the world of the media has woken to the human condition.  Real life suffering did not seem so far away.  The next administration was going to be about, even if the candidates would not publicly admit it, survival in a pair of gently used shoes. 

 

I sense an undertone of gasoline rationing, in a world with limited supply of foreign oil, as one candidate’s solution.  No one was asking specifics.  Talk was cheap anyway, except when you were paying for those commercials.  Where I live, you saw little sponsorship on televsion except by the candidates.  And this more than anything reflected a sick society. 

 

The real price of freedom:  “Human nature doesn’t change, with the changing of latitude or longitude, with parliamentary majorities, and not even with the passing of time,” said Tarcisio Bertone this week.  In a collapsing economy everything was at risk.  Health, education, defense.  In a collapsing economic system called capitalism, where there has been a true revolution going on, basic human rights involving speech, religion, and the press were at risk.  The War on Terror had not ended.  It also never began on September 11, 2001.  The struggle of the human condition has been ongoing before 1776.  America never held the patent to human rights.  Freedom was not defined by Americans in the 20^th Century.  It was an ongoing struggle.  America was just the place where you could find a pair of gently used shoes. 

 

It is said that political films, like political books, are most eagerly welcomed in societies that repress free speech.  It is said that religion flourishes in a society when religious freedom is supressed.  The human spirit is spurred on in its quest.   

 

 

This morning it seems to me that an end of an era is at hand.  Dew points were falling, the leaves were changing, and fear was in the air.  Things that had always been cheap and available, gas, credit, would be regulated like drugs and alcohol.  Banks would be nationalized.  The vibrations of it all.  On democracy and freedom.  I suspect even gasoline, if you listen to what Obama is never asked.  The way of life that I have known is changing.  There will be political consequences to governments around the world.  In some places there will be revolutions.  Intimacy between neighbors has long been lost in this society.  Commuting long distances had isolated us all. 

 

Evil men will jump in at some point.  I had not figured out the appropriate defensive measures if there were any.  Dwight Eisenhower had once said when it came to the War Department, Department of Defense, it all was dependent on a thriving econmy of hard working citizens.    

 

This week in Greensburg, Pennsylvania, Lawrence Brandt, the bishop of the Roman Catholic diocese of Greensburg which has about 180,000 parishioners in four counties east of Pittsburgh, announced the consolidation of 28 parishes or sharing of clergy and the clsosing of 14 of its 100 parishes that will take effect Oct. 30th, in an effort to deal with a priest shortage.  Brandt said 20 percent of the diocese’s priests were being used to serve just 2.5 percent of its population, in his decsion that grew out of a three-year study.  “I know that people are mentally and emotionally attached to their parishes and churches in a way they identify with no other building or entity,” Brandt said in a statement. “It is understandable that they feel a part of themselves has been lost forever.”

 

When Catholics quit praying, they argued and quit becoming priests. 

 

In Minneapolis–St. Paul, we had two papers that were both on the verge of collapse, running out of money and opportunity.   When you ran out of money, the choices were limited.  No one was discussing the affect on the community with the loss of real freedom when it was gone.  When American quit praying in this suburban world, they argued, really quit caring, and went about individual lives.  In a sense, the community was broken.  No one cared about a newspaper owner far away.     

But I was going to be harder to find a gently used pair of shoes.  And the distances between us were a long way to walk.  Whether it was newspaper closings, church closings, or the loss of jobs, it was all about the survival of the fittest.    -

Erectile Dysfunction in the Worst Way

Earning reports are the catalyst that drive a stock market.  Up.  There is nothing to drive this market up except the truth.  Bill White is an economic adviser to of the Bank of International Settlements, the world’s clearinghouse for central banks in Basel, Switzerland.  He said last week, in what is about the best common sense I have seen, “But in the end, if the fundamental position is that there is too much credit in the system, something has to give.”  And lower interest rates are not the answer.  In the flood of credit, some people are now gonna drown.  They should drown.  The AIGs.  The Morgan Stanleys.  Goldman Saches.  The rescue was not offered to Lehman Brothers.  They caused this mess.  So did Merril Lynch, Morgan Stanley, Goldman Sachs.  And Bear Stearns.  Henry Paulson and the former treasury secretary in the Clinton Adminstration, Paul Rubin, aboth ran Goldman Sachs.  Rubin is now advising Senator Obama.  So we are all gonna drown with the 5 investment banks in the $531 trillion dollars in liabilities created with all of these derivatives.    

 

 

In an article on March 10, 2008, PAUL B. FARRELL

 

 

In Warren Buffett’s 2002 letter to Berkshire shareholders, he warned of a future that many others chose to ignore.  Fresh on Buffett’s mind was his acquisition of General Re four years earlier, about the time the Long-Term Capital Management (LTCM) hedge fund with a relatively small $5 billion trading loss which almost killed the global monetary system. LTCM nearly killed the system with an amount that was peanuts compared with $531 trillion dollars of subprime-credit write-offs now making Wall Street’s big shots look like amateurs.

 

In five years, derivatives metastasized into a massive bubble, from about $100 trillion to $516 trillion by 2007, according to the most recent survey by the Bank of International Settlements, the world’s clearinghouse for central banks in Basel, Switzerland. According to the New York Times, the derivatives market is$531 trillion, up from $106 trillion in 2002 and from a relative pittance of that of just two decades ago. The financial contract “derives” value from underlying assets like stocks, bonds and commodities. Derivatives were created to soften — or as a “hedge” — investment losses. Some of the contracts protect debt holders against losses on mortgage securities. It is my understanding a point of reference is needed to be created for the performance of the market against which the derivative contracts are priced.  In the case of property derivatives, value is derived from the value of an underlying real estate asset, with a. the reference used by Standard and Poors of the S&P Case Shiller, or the Investment Property Databank and the FTSE index in the United Kingdom.  Many individuals own a common derivative: the insurance contract on their homes.

 

To put that $516 trillion in the context of some other domestic and international monetary data:

• U.S. annual gross domestic product is about $15 trillion
• U.S. money supply is also about $15 trillion
• Current proposed U.S. federal budget is $3 trillion
• U.S. government’s maximum legal debt is $9 trillion
• U.S. mutual fund companies manage about $12 trillion
• World’s GDPs for all nations is approximately $50 trillion
• Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
• Total value of the world’s real estate is estimated at about $75 trillion
• Total value of world’s stock and bond markets is more than $100 trillion
• BIS valuation of world’s derivatives back in 2002 was about $100 trillion
• BIS 2007 valuation of the world’s derivatives is now a whopping $516 trillion

Derivatives have become the world’s biggest “black market,” exceeding the illicit traffic in stuff like arms, drugs, alcohol, gambling, cigarettes, stolen art and pirated movies. Why? Because like all black markets, derivatives are a perfect way of getting rich while avoiding taxes and government regulations. And in today’s slowdown, plus a volatile global market, Wall Street knows derivatives remain a lucrative business.

 

The folks at BIS tell me their estimate of this $516 trillion “notional” value (maximum in case of a meltdown) doesn’t include private deals between two “non-reporting entities.” But includes “transactions in which a major private dealer (bank) is involved on at least one side of the transaction,” adding that their reporting central banks estimate that the coverage of the survey is around 95% on average.  Also, keep in mind that while of the deals is a good measure of the market’s size, the 2007 BIS study notes that the $11 trillion “gross market values provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets.”

 

 

That “domino effect” is now repeating many times over, straining the world’s monetary, economic and political system as the subprime housing mess metastasizes, taking the U.S. stock market and the world economy down with it.

 

Bill Gross is the best bond fund manager in the world.  Pimco’s bond fund king said “What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August 2007.” In short, not only Warren Buffett, but Bond King Bill Gross, our Fed Chairman Ben Bernanke, the Treasury Secretary Henry Paulson and the rest of America’s leaders can’t “figure out” the world’s $516 trillion derivatives.

 

Gross says we are creating a new “shadow banking system.” Derivatives are now not just risk management tools. As Gross and others see it, the real problem is that derivatives are now a new way of creating money outside the normal central bank liquidity rules. How? Because they’re private contracts between two companies or institutions.

 

Columnist Jesse Eisinger’s $300 trillion figure came from an earlier study of the derivatives market as it was growing from $100 trillion to $516 trillion over five years. Eisinger concluded: “There’s nothing intrinsically scary about derivatives, except when the bad 2% blow up.” Unfortunately, that “bad 2%” did blow up a few months afterwards, even as Bernanke and Paulson were assuring America that the subprime mess was “contained.”

 

BIS is primarily a records-keeper, a toothless tiger that merely collects data giving a legitimacy and false sense of security to this chaotic “shadow banking system” that has become the world’s biggest “black market.”  Central banks require reserves like stock brokers require margins, something backing up the transaction. Derivatives don’t. They’re not “real money.” They’re paper promises closer to “Monopoly” money than real U.S. dollars.  And it takes place outside normal business channels, out there in the “free market.” That’s the wonderful world of derivatives, and it’s creating a massive bubble that could soon implode.

 

Op-Ed Columnist

That Hissing Sound

By PAUL KRUGMAN

Published: August 8, 2005

This is the way the bubble ends: not with a pop, but with a hiss.

Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.

So the news that the U.S. housing bubble is over won’t come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.

Of course, some people still deny that there’s a housing bubble. Let me explain how we know that they’re wrong.

One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller “Dow 36,000″ are now among the most vocal proponents of the view that there is no housing bubble.

Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it’s easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don’t really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can’t even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions – hence “zoned” – makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.

In the nation as a whole, housing prices rose about 50 percent between the first quarter of 2000 and the first quarter of 2005. But that average blends results from Flatland metropolitan areas like Houston and Atlanta, where prices rose 26 and 29 percent respectively, with results from Zoned Zone areas like New York, Miami and San Diego, where prices rose 77, 96 and 118 percent.

Nobody would pay San Diego prices without believing that prices will continue to rise. Rents rose much more slowly than prices: the Bureau of Labor Statistics index of “owners’ equivalent rent” rose only 27 percent from late 1999 to late 2004. Business Week reports that by 2004 the cost of renting a house in San Diego was only 40 percent of the cost of owning a similar house – even taking into account low interest rates on mortgages. So it makes sense to buy in San Diego only if you believe that prices will keep rising rapidly, generating big capital gains. That’s pretty much the definition of a bubble.

Bubbles end when people stop believing that big capital gains are a sure thing. That’s what happened in San Diego at the end of its last housing bubble: after a rapid rise, house prices peaked in 1990. Soon there was a glut of houses on the market, and prices began falling. By 1996, they had declined about 25 percent after adjusting for inflation.

And that’s what’s happening in San Diego right now, after a rise in house prices that dwarfs the boom of the 1980’s. The number of single-family houses and condos on the market has doubled over the past year. “Homes that a year or two ago sold virtually overnight – in many cases triggering bidding wars – are on the market for weeks,” reports The Los Angeles Times. The same thing is happening in other formerly hot markets.

Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn’t have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero?

Now we’re starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone – not just those who own Zoned Zone real estate – should be worried.

From Dave Smith’s Economics website…” Bill White is a Canadian economic adviser to the Bank for International Settlements (BIS), the Basel-based central bankers’ bank.   Alan Greenspan appeared to be aware of the danger. He watched with alarm as each time the debt bubble threatened to burst.  However, Greenspan and his fellow central bankers around the world, rather than accepting a temporary downturn in their economies, pumped up the bubble even more by cutting interest rates. “What amazed me was how each time they managed to rejuvenate the system by reducing interest rates,” Bill White said last week. “But in the end, if the fundamental position is that there is too much credit in the system, something has to give.”  In June 2007, two months before the present global financial crisis broke into the open with devastating effect, White warned in the Bank for International Settlements’ annual report that, just as “no one foresaw the Great Depression of the 1930s”, so it was possible that mainstream economic opinion was understating the dangers from toxic debt.  It was a common view that “busts” could be swiftly tackled by central banks cutting interest rates, White noted. But just because that had worked in the recent past did not mean it would in the future.

Thirty-one Percent of Economist Still Don’t Think There is a Recession

 

When there is too much credit in the system, something had to give.  The market has no faith in the government which has been carpet bombing liquidity.  The market is saying, no matter what the government does, there is going to be another at least 25% to 30% correction in the valuations of homes, the credit markets that financed these homes, and the equity markets that are tied into the world-wide economy.  No one was differentiating one business from another. That was what happened in giant pyramid selling schemes.  Banks don’t trust banks.  And this morning people not only do not trust banks but any company’s stock. 

 

In other news today, 31% of economists do not think there is a recession.  Are these people reading counterfeit tea leaves?    

Some snippets off the web, in blue:  

“We are in the middle of a crisis.  It is not over.  It is to be taken seriously, but it is centrally an American crisis.” – German Finance Ministry spokesman Torsten Albig on September 15, 2008.

 

“At this stage, we’re quite confident.” – A spokesman for the French Finance Ministry, who said that French banks and French government debt agency, Agence France-Tresor, are not in danger from the market turmoil in the U.S. on September 15, 2008

 

July 2008……UK mortgage lending fell by 32 per cent in the year to June and will worsen further if the Bank of England raises interest rates in a bid to combat. 

 “So why is reduced mortgage lending always reported as a ’shortage of finance for struggling buyers’?”                                            -Victor M, Cricklewood, London

 

NEVER ever try and mess with the markets.  You (government) are doomed to failure. History proves that. You put in place uncontrollable regulation and forgot to control the regulators -the fraudsters got you as they always will.  The last bastion of capitalism being run by neo-commies what a state we are all in. If someone had told me this 40 odd years ago when I first met people in the American financial world they would have though me ‘raving’.  -Victor M, Cricklewood, London

 

From thetimes.co.uk……a little history.  “We now know that the sub-prime securitized-mortgage market was little more than a giant pyramid selling scheme in which simple transactions, loans to buy homes, were packaged, bundled, sold, refinanced and the credit risk insured by myriad institutions. None of the bankers who grabbed the passing parcels had any means of ascertaining the solvency of the ultimate borrowers, nor any idea of the true value of the bricks and mortar that underpinned the loans.   

 

“If we want to know why some bankers behave like bison racing to the cliff-edge, we need to remember where they came from. The guts of an investment bank is the broker-dealer model, the merging of two types of business: brokers – people who act as agents for investors, buying and selling securities on their behalf – and dealers – who act as principal, trading securities for their own account.  Three decades ago, brokers and dealers (the latter were known as stock jobbers in Britain) were separate partnerships, owned by the management whose personal wealth was on the line every day, in every trade. I remember visiting a jobber’s pitch in 1985 on the floor of the London Stock Exchange, where a lad barely out of school scribbled entries into a large, black ledger. He could mentally tot up his long or short position at feverish speed from a page of buy and sell orders.  Today, the books are electronic and the positions algorithmic, but the point is not a sentimental one. Today’s broker-dealers have no skin in the game – they are staff and the bosses are staff. Their rewards in shares are a bonus, never a liability.  The Big Bang in London in the mid-Eighties and the earlier deregulation in New York transformed a business made up of ruthless individuals joined together by a merchant’s compact into a tower of corporate ego. Merchant banks, such as SG Warburg and Morgan Stanley, bought brokers and jobbers and the culture of personal ownership and personal risk quietly vanished.  It’s difficult to imagine the boy on the exchange floor behaving like Jérôme Kerviel, the Société Générale trader who set fire to his bank’s balance sheet, and it is not just a question of scale or computers. It is about the corporate mindset that makes risk political, a struggle between managerial egos rather than a simple balance of good bets versus dangerous gambles. It is the difference between directors’ service agreements – with generous severance terms – and joint and several liability.

Partnerships are run by people who know that their home is at risk if they get it wrong, but for Dick Fuld, the chief executive of Lehman, no such danger threatened. His greatest fear was losing face. Ego, not greed was what drove Lehman off the cliff and ego will put paid to Wall Street, too.        -carl.mortished@ thetimes.co.uk

Paulson built up a personal net worth of over $700 million in his career at Goldman Sachs according to estimates.  He was compensated to the tune of $30 million in 2004 and $37 million in 2005.  Henry Paulson put one of these 5 investment houses as well as all Americans into this mess.  According to the International Herald Tribune, Paulson “was one of the first Wall Street leaders to recognize how drastically investment banks could enhance their profitability by betting with their own capital instead of acting as mere intermediaries.” In a Business Week article in 2006, Paulson was “one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits.” “Mr. Risk Goes to Washington,” reported that under Paulson, derivatives meant “taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999. It means placing big bets on all sorts of exotic derivatives and other securities.”

 

From Dave Smith’s Economics website…” Bill White is a Canadian economic adviser to the Bank for International Settlements (BIS), the Basel-based central bankers’ bank.   Alan Greenspan appeared to be aware of the danger. He watched with alarm as each time the debt bubble threatened to burst.  However, Greenspan and his fellow central bankers around the world, rather than accepting a temporary downturn in their economies, pumped up the bubble even more by cutting interest rates. “What amazed me was how each time they managed to rejuvenate the system by reducing interest rates,” Bill White said last week. “But in the end, if the fundamental position is that there is too much credit in the system, something has to give.”  In June 2007, two months before the present global financial crisis broke into the open with devastating effect, White warned in the Bank for International Settlements’ annual report that, just as “no one foresaw the Great Depression of the 1930s”, so it was possible that mainstream economic opinion was understating the dangers from toxic debt.  It was a common view that “busts” could be swiftly tackled by central banks cutting interest rates, White noted. But just because that had worked in the recent past did not mean it would in the future.

 

Japan had cut interest rates when its bubble burst, as did America in 1930, but with limited effect. Sometimes the downward forces are just so big that even ultra-low interest rates – zero in Japan’s case – will not do the trick.

 

Warburton says the credit system has “atrophied” and also believes the deep downside risks he has been warning of for some time are now in plain view.  (See http 

://www.economicsuk.com/blog/cat_david_smiths_other_articles.html.)   

 

And to start the day, on October 5, 2008 the one-month dollar Libor has fallen to 4.0925% from 4.11% Friday, well above the Federal Reserve’s 2% Fed funds target, with the three-month dollar Libor slipping to 4.28875% from 4.33375% on Friday. 

 

There was a battle of ideology going on between the credit markets and the equity markets. In the current envirnment, no matter the moves put on by Henry Paulson, a son of Wall Street, banks were not buying in.  That was why credit markets froze. Bankers have always been conservatives.  They were not buying into the social engineering on capitalism.  They neither trusted another bank’s balance sheet nor the government. 

 

Oh the cost of doing business between banks.  In my view, it was only a matter of time before one side would win.  Ultimately, either hyperinflation or deflation would be the result? 

 

The Fix Was On

Money & Sex.  Making it too easy.  Making it too available.  Then the payback.  Men. Women.  Together.  Apart.  Financial engineers, social engineers trying to fix the problem.  In an election year. 

 

So what was the state of your relationships with bankers.   Had you taken or given too much? 

 

Abortion:  whose fault was it?  Public policy?  The guy?  The girl?  Or me?  What was my role?  Was it all a crisis in valuations?  Was it all about how much I was valued?  How much I was needed?  How much I had taken, irresponsibly?  How much I needed someone?  Who would survive?  Government could fix all this?  Seatbelt laws.  Speed limits.  Bailouts.  And we all really had a vote? 

 

 We all knew deep inside there would be a payback for all of this one day. 

 

Should government decide who survives all this? 

 

The Hartford.  A financial company.  When people start redeeming cash, the company was gone.  Who was contaminated?   How many others?  Who could you trust?  The market reaction was all based upon trust. 

          

Showing real love for someone, to somebody, was another story. Real love.  Real love was not just a short ride.  As I overheard a woman say two days ago, people do not change their religious or political affiliations quickly.  Or to get divorced.  It took a lifetime to acquire these beliefs.  It took time to make a decision. 

 

Roe versus Wade.  The War of the Roses.  Rescue and rescue plans. 

Wanting some more.  Money.  Sex.  Hunger. 

 

Money.  Sex.  Law without order.  Order without law.  Hunger.  Oversight.  Enforcement.  Public policy.  A deeper pocket.  

 

Law.  Order.  Should government decide who survives all this?  In the Last Judgment, government can fix all of this? 

 

Plan.  Listen to constituents.  Act quickly.  Vote.  The House of Representatives is expected to vote Friday.  

 

 

Those Dog & Pony Shows

Valuations.  Can there be any doubt that in America, we have been living with false valuations?  

 

Journalism was never supposed to be about dog and pony shows.  Television had helped hijack truth that a daily newspaper was supposed to be after.  At the time a president actually had press conferences, the event was televised.  There once had been an age when the truth was highly valued.   

 

What have we passed on the generation that was born in the 1980s?  They actually were raised to believe that homes were worth what they sold for.  And in the era that they grew up, they never batted an eye at Dow 10,000. 

   

I remember coming home from a fishing trip on August 13, 1981.  I had been away from civilization for the week.  And when I heard the Dow closed at 798, I could not wait to make my first mutual fund purchase the following Monday. 

       

I was fortunate for the times I was born into.  I had grown up with parents of the Depression.  Although I never heard a great deal of stories, a lifestyle was reflected in day to day living.  I never expected my parents to give me a car to drive to school.  Some things can only be absorbed. 

   

At some point in time, I learned there was no such thing as magic.  I appeciate that most of us live in an age of illuison, promoted by the media.  It was why people bought People magazine.  It was the era of the dog & pony show, climaxed every four years. 

 

I spend a lot of time following the business news.  It is funny the words that are used –valuations, redemptions, rescue.  Rescue was synonymous with salvation.  Most of us spent time on the unimportant.  These times are teaching us what to really value.   

                             

These Septembers of this presidential administration are bookends that can never be forgot.  Times of grave concern, not yet panic, are teaching moments, about true values.  I am learning a lot about myself. 

 

Paul Krugman is a professor of Economics and International Affairs at Princeton University and has written for the joined The New York Times since 1999 as a columnist.  In August 2005, he wrote:  “This is the way the bubble ends: not with a pop, but with a hiss.  Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.”

 

That column closed with, “Now we’re starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone – not just those who own Zoned Zone real estate – should be worried.” 

 

http://www.nytimes.com/2005/08/08/opinion/08krugman.html

 

He also offered a well reasoned opinion piece on September 24, 2008 as to why to vote against the Paulson Plan. 

 

History had come alive much more vividely with this crisis.  The years of 1905 and 1916 in Russia.  Fear and trembling did that.  Emotions are being stirred and opinions are becoming more passionate.   

 

What have we passed onto the generation that was born in the 1980s?  The kids who were born in the suburbs, after America had become an urban society in the 20^th Century.  These suburban people seemed scared, as fearful as city people, as did the people on both sides of the aisle.  There was fear now and division.  The fear was real.  What whites had of blacks following the riots of the 1960s.  What blacks had of whites in the days of slavery.  There had always been fear. 

There was fear, but why was there anger?  Was anger directed at the government over wealth and disbursement of wealth?  People felt believed that self-worth was based on dollars?  Public policy was based upon dollars or people?  The anger was reflected in how representatives got along in state legislatures and the federal legislative bodies.  Or did not get along.  These states were not real united.

 

The younger generation actually had come to believe that homes were worth what they sold for.  And once poor people also bought into the idea, using sub-prime mortgages, those financing vehicles that allowed at its end only payment of interest, not principal.  And in the era that they grew up, the young, the new capitalists, never batted an eye at Dow 10,000.

 

How could valuations be false?  I had always been taught you could not believe everything you read in the paper.  I am not sure that caveat is ever made about television and all the commercials that are aired.  And it seems that politicians are elected only by commercials these days, not on either ideas or ideals.  

The lack of ideas seem to have shown up in the Paulson Plan.  The House seemed to see its transparency.  Our houses are not worth what we think.  And nothing was going to prop up thses values.  Not any new dog and pony show by any politician in the House or The Senate. 

The Financial Sector is not worth what CNBC thinks.  And like Rin Tin Tin, the movie star who paid a publicist, it was time to realize that he was not as great as the publicists had been telling everyone.