Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago. (emphasis mine)
The data about employment, overcapacity, too many homes on the market, too much corporate welfare and too many jobs in the FIRE economy without producing anything of value point to deep, structural problems that cannot be solved or eliminated without pain.
This pain will come in the form of job losses and restructuring since it is only a matter of time before we cannot simply roll over our debt and expect perpetually rising asset prices.
It seems to me this March rally has been based on speculation of recovery rather than *tangible improvements* in the actual economy. It looks like a lot of insiders feel the same way.
I called this site Inthon since it comes from the phrase Intellectual Honesty. There are plenty of reasons to believe that this market has legs and there are plenty of reason to believe that this market is toast. I’ve found it helpful to read the strongest, most opinionated sides of an argument before making up my mind.
Politics and increasingly, economics, are a confidence game. The pieces of green paper in your wallet are only worth something since the person who accepts those pieces of paper has confidence in the fact that they have value. When a system relies on confidence, it is imperative to those in power that the facade of confidence be maintained.
As Buddha has said
Believe nothing, no matter where you read it, or who said it, no matter if I have said it, unless it agrees with your own reason and your own common sense.
Thanks for reading.
The Treasury Department has announced a new plan to try and work the toxic assets out of the system by using taxpayer funds to lure back private investors. This “Mary Poppins Economics” will have all the hedge funds singing…
I have to agree with Mish that the plan does not seem promising for taxpayers, only potential investors. Hedge funds, pension funds and irresponsible asset managers who’ve failed over the last few years, can now buy assets with the help of the taxpayer. This system is a direct subsidy/bribe/handout to woo private capital back into the market to buy toxic assets and get credit flowing again.
Maybe I am being cruel, but I believe this debt should be written down, even if it leads to painful job losses and even if we suffer as a nation. We cannot keep piling on debt in order to maintain a socialist financial system with the facade of capitalism.
Allowing millionaires to buy assets with the backing of taxpayers seems to be a little too easy for the MIT geniuses that didn’t think housing would fall and thought anything decent should be rated AAA.
This program ensures the FIRE economy will continue and the mantra of too big to fail will continue to reign. I hope I am wrong.
In his op-ed piece in the Journal, Geithner speaks about “borrowing too much”. How does he square the fact that while sitting on the New York Fed, Geithner voted for all NINETEEN Fed actions lockstep with Greenspan starting December 9, 2003 through March 28, 2006? That includes four consecutive meetings of leaving the Fed Funds target rate at 1.00% Proof is here.
Why does Greenspan take all the heat for not raising rates soon enough, yet Geithner gets none?
In any event, no matter what anyone says, the plan will be debated back and forth by politicians and those that benefit from government bailouts (big businesses, hedge funds, lobbyists, lawyers) will make big bucks. Try and position yourself as best as possible with that in mind. I wish you the best.
…in the most de-light-ful waaaaaay!
For more financial bamboozlement, click here
John Thain was in the news recently for being fired from Bank of America. He always intrigued me for a number of reasons.
- He has been methodical in advancing his career and his reputation.
- He has an enormous ego.
- He knows exactly how to play the game of banking.
I remember reading about John Thain in 2003 when he was CFO of Goldman Sachs. I used to subscribe to the Financial Times and I would be enamored reading about him. After he made the move from Goldman to be Chairman of the NYSE, it was clear that he knew how to self-promote and advance himself. When he took the Merrill job, it seemed like the next logical step for him.
Like a lot of people who are very career driven, he obviously has a huge ego. Within months of taking over the CEO role at Merrill, he spent over $1 million refurbishing his office. Highlights include dropping over $1,000 for a wastepaper basket and an $87,000 rug.
It seems to me that when someone indulges in such a fashion, it becomes hard to take their “social responsibility” pleas very seriously.
Like I mentioned in a post late last year, John Thain has been a master of talking tough while scrambling frantically to do everything he could to keep Merrill solvent. Mish covered this point brilliantly last July.
All of this brings me to my final point: John Thain was successful because he knew how to play the game of banking and finance. He easily lied to CNBC, institutional and retail investors, and Bank of America, before he was finally removed. He effortlessly talked his book while raising capital to avoid a liquidity crisis. He succeed in one of the most difficult business environments in recent history by effectively deceiving the world about Merrill’s liquidity, solvency and risk management. This Friday it finally caught up to him.
John Thain is a very intelligent, ambitious man. It is a shame that in our current economic system, a man like him is part of the FIRE (finance, insurance, real estate) economy and not employing others in new life-improving technologies. As global deleveraging continues, I hope that many brilliant and savvy thinkers find their way back to productive jobs which help compound and increase the world’s wealth.
As people become more conscious of the fact that Merrill received TARP funds and had access to the discount window and could borrow at 2.5% while using enormous leverage, only then will they will start groping around for solutions. Rather than the usual scapegoat of “the rich”, hopefully citizens will realize that a debt-based economy, fractional reserve banking and government management of interest rates cannot possibly succeed in the long run. Only then will people be open to solutions not espoused by the investment banking beneficiaries.
UPDATE (1/26): John Thain read my blog and has capitulated!
To read more about deceitful CEOs, click here.