   |
|||
Welcome To The USSAKarl Denninger Our government is truly unbelievable. Election + Fear = Stupidity. The sort of ban that we saw this morning on shorting - 800 stocks - is both foolish and unprecedented. There are many, many reasons to short a stock that have nothing to do with trying to drive a stock into the ground. For example, if you're concerned about a preferred stock issue, you might short the underlying while being long the preferred. This gives you a 100% safe coupon - that is, dividend - while exactly balancing (or close to it) your risk. This ability to hedge off that risk just disappeared. Now has there been manipulative conduct and predatory shorting? Yes. But you can't short a company and make money unless the company is overvalued in the first place. If you try it you will lose your shirt as the actual value, as discovered, will cause the price to rise instead of fall, your short sale notwithstanding. And make no mistake about it - this crisis is not an accident. It is in fact a deliberate act - by our government. Who enabled it? Everyone. Alan Greenspan, by flooding the market with money after 9/11 and the technology stock crash, for one. Barney Frank and the rest of Congress, along with Bill Clinton, who made it public policy that everyone - from a daycare worker to a McDonalds' cook to someone on welfare - could and should own a house. Both Clinton and Bush Administrations who intentionally looked the other way while rampant fraud ravaged Wall Street and Main Street both, including intentional blindness to outright false accounting in the form of "Level 3" assets and claims of solvency that were not and still are not true. Now, just yesterday, we find out that The SEC made possible the expansion of leverage in the investment bank and broker/dealer community that made possible the loose lending which helped fuel the housing bubble and mess we are now in:
Yep - the SEC was not only involved but basically caused this mess. And now that Congress is involved, we are going to get the mother and father of all debt - shoved down our throats:
This is nothing short of unbelievable, and that actually understates the cost, which is likely to be vastly more than stated. It always is. Remember folks, the original estimate on the S&L bailout was that it would cost $20 billion. The actual cost, when all was said and done, was approximately $160 billion dollars extracted from your wallets all across America. So let's add it up - thus far:
Oh, and don't believe that $500 billion number. Its a lie. I have long maintained that we have about $2-3 trillion of bad housing-related debt involved, of which only $200-300 billion has been written off. So there's still $1.7-2.7 trillion out there to be cleared in this mess and you are going to get charged for all of it unless you literally take to the phones and the streets right now - this weekend - and stop it. This sort of election-year pandering is beyond outrageous; it is nothing other than government theft (from you) to bail out the pigmen of Wall Street who have robbed you blind for the last decade. WE THE PEOPLE DO NOT HAVE THE MONEY TO SUPPORT THIS AND THIS SORT OF PANDERING AND OUTRAGEOUS CRAMDOWN OF THE COST OF WALL STREET'S MALFEASANCE UPON THE CHECKBOOK OF THE AMERICAN CONSUMER IS AN ACT OF ECONOMIC TREASON. I hope you like INSANE (and real) monetary inflation because the raw monetary printing required to support this program is going to blow your mind (and household budget). What you're seeing today is the utter fear in the hearts of people who have made (correct) bets that the financial sector is radically overvalued and these firms are bankrupt; they have now been told that bankrupt or not, you, the taxpayer, are on the hook for their insolvency, despite THEIR bad decisions. In addition the liquidity that was provided by the floor traders and others in the market who made those correct bets - many of whom will be broke today, literally - will permanent disappear from the market. Oh, by the way, we don't have the money to do this in America, and not only has LIBOR not unlocked, but spreads haven't come in nearly as much as you would think if the problem was actually solved. Beware chasing this - yes, we are going to be up huge today - probably 500+, maybe 1000+ on the DOW - think carefully about whether there has actually been a resolution to any of this mess, and whether the root problems identified here have been removed. If you judge not, then we risk the mother and father of all market crashes at some point in the future - and probably not far in the future either. ### source: http://market-ticker.denninger.net/archives/2008/09.html Sep 19, 2008 Karl Denninger's Market
Ticker All material herein Copyright ©2007-2011 Karl Denninger. All Rights Reserved.
No material here constitutes "investment advice" nor is it a recommendation to buy or sell any financial instrument, including but not limited to stocks, options, bonds or futures. The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis or opinion in this article are your sole responsibility. Looking for "The Best of Market Ticker"? Check out Ticker Classics. 321gold Ltd |
Disclaimer: The content of this
article is provided without any warranty, expressed or implied.
All opinions expressed in this article are those of the author
and may contain errors or omissions.