Let them fall

I am not welcoming the collapse of any company but I am glad to see that the US government did not bail out Lehman Bros.

The investment banks orchestrated this problem and should suffer from their own mismanagement.

I travel to London regularly and over the past couple of years, the number of new Porsches and Austin Martins was increasing. In fact the Austin Martins in London were like BMWs in San Francisco, aka the Bay Area Volkswagen.

Well the music just stopped and its time for the bankers to pay the price for their errors...not the taxpayers. Sorry, but I have no sympathy for the 28 year old guy who just lost his $90K per year trading job. He has to get on the Tube like the rest of us.

During the “global downturn” of the last two years, the markets for luxury products and rats as food, both showed solid growth. This highlights the massive shift in wealth to the financial “wizards” at the expense of middle class consumers and poor nations.

Globally people have been suffering from the inflation caused by financial engineering. I am glad to see the taxpayers are not paying further to keep investment bankers in business.

Over the last 10 years the rise in housing and commodities was accelerated by debt speculation. Commodities, much like real estate, only requires a small percentage down payment to purchase the asset. In fact you can get a loan for the down payment on the asset, so no money down and you are a real estate magnate or a hedge fund manager. This debt speculation drives demand and prices go up, so then people borrow more against the debt-inflated “value” of the assets and prices spike further. There was no real value creation, only debt speculation layering on itself....let me look in my economics 101 book. Not good.


In fact Greenspan warned hedge funds posed a risk to global capital markets.

When this unwinds it happens fast and many people are caught with debts far exceeding the market value of the asset. They have may have no money invested so they can easily walk away. This happened to real estate and now commodities are starting to drop. Be ready for more pain from the hedge funds.

Unfortunately there will be more pain for consumers and some of the bankers that lost their jobs will walk across the street and raise funds to buy the assets they inflated for a fraction of their value. Making millions on the over and under exuberance of the market.

The good news is the fed and a group of remaining banks are creating a liquidity pool to keep cash in the system, of course it is to save their own arses, but it will help keep cash for consumers and to run real value creating business. Could get bumpy though, hold on.

There was a great article in the BBC where the finance minister said; we had 10 years of great growth, now we have to pa the price for some of our excesses. True point, don’t look for someone to blame or bail you out, time to suck it up, be thrifty and remember the good times you had. Hopefully you kept some cash or better yet gold on the sidelines. I hear there is going to be a yard sale on Austin Martins.

Also, please DO SOMETHING and write your local congressman to demand they regulate these bankers.