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Are We There Yet? No Way! (And How to Know When We Are There)

Given the events of the past few days it is once again time to exam­ine the immor­tal ques­tion posed by chil­dren and traders alike, “are we there yet”?

Nope, not yet, we aren’t there yet, not even close. The bot­tom hasn’t been found in the credit mar­kets or the stock mar­ket and, unfor­tu­nately, we still have a way to go.

I am not sure when the bot­tom will be found but we will know we are get­ting there when the U.S. econ­omy makes it for 60 days with­out a run on a finan­cial insti­tu­tion. After 60 days with­out a major finan­cial cri­sis I will write “Hey kids, we’re there”. But until then, the trip continues.

When we get “there” I hope we don’t look back on the good old days of high lever­age and spend­ing beyond our means and wish we could go back to that sim­pler time; a time before mark to mar­ket account­ing and account­abil­ity. I hope “there” is a happy place where the U.S. has a future because we have low unem­ploy­ment, high pro­duc­tiv­ity, low deficits and lots of invest­ment and sav­ings. But then again, I still believe in the tooth fairy.

In June I wrote that we weren’t there yet because we flunked the “60 day test” and because Lehman Broth­ers and other banks and invest­ment banks “would have expired but for the unbe­liev­able work of Bernanke”. I started get­ting ter­ri­ble hate e-mail. So, I started using a food tester before I ate.

A lit­tle later in June I was on FOX Busi­ness Net­work and repeated that we weren’t there. Later that day sev­eral peo­ple that with uncon­trol­lable anger syn­drome called me on the tele­phone and ran­domly shouted obscen­i­ties at me. So, I stopped open­ing my own snail mail.

A few weeks later I wrote a series of blog arti­cles on money sup­ply and its impli­ca­tions that were pub­lished on Seek­ing Alpha. I sug­gested that econ­o­mists were “mak­ing up data” that didn’t exist and Fed pol­icy was going to result in credit rationing. I was called names on blogs and received com­ments from “on line scream­ers” who believe in scream­ing often, loud and with nasty lan­guage. So, I had my kids start using my wife’s maiden name at school.

But, despite the threats, the name call­ing and the blog screams, we weren’t there in June, July or August and still aren’t there in Sep­tem­ber. And, Fed pol­icy that caused credit rationing didn’t include rations for Fred­die, Fan­nie, Lehman and, now, maybe, AIG.

Since June when I first sug­gested that we had a way to go the Dow, the S&P 500 and the NASDAQ are down approx­i­mately 7.80%, 9.43% and 9.08%, respectively.

I’m sorry we aren’t there yet. And, I don’t like it when peo­ple call me names. I am sorry that so many peo­ple have trusted senior exec­u­tives at their com­pa­nies and those exec­u­tives have let them down. I am sorry the reg­u­la­tors have let us down and I am sorry that investors are los­ing money.

But, we still aren’t there yet and until we have 60 days with­out a finan­cial cri­sis we aren’t going to be there.

For non-professional investors that want to play the mar­ket I have some advice. Before buy­ing stocks you need to answer a more fun­da­men­tal ques­tion; red or black?

Posted in: AIG, BANKS, Credit Crisis, Economic Statistics, economy, Fannie Mae, Federal Reserve, Finance, FOX BUSINESS NETWORK, Freddie Mac, Lehman, Seeking Alpha, Stock Market

1 Comment

  1. Rob

    By the way, did you notice that the Reserve Fund, a money mar­ket fund, broke the buck yes­ter­day (to 97 cents)? I didn’t even hear about it in the press! What does that augur for a new cri­sis in con­fi­dence — this time when a slew of other MM funds are forced to start break­ing the buck, hit­ting retail investors directly in their pock­ets (rather than indi­rectly, through the fall of “Wall Street fat cats”)? How close are we already to a nation­al­ized finan­cial sys­tem due to the fail­ings of our reg­u­la­tors (has the SEC issued that new short rule yet?).

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