Monday, August 3, 2009

Two Good Links and a Brief Rant

Lost in the media excitement over the S&P 500 crossing the 1000 mark again are thoughts on how the "system" was "saved", and where any imbalances on the global economy are.

Readers with the time may want to scan a post on Naked Capitalism today that reviews what happened the past 12 months--documenting the massive transfer of wealth from you and me to rich people in Big Finance-- and a "link" on the same site from an analyst who claims a perfect record of identifying important financial bubbles as they were inflating, and who believes that China's financial and property markets are in a bubble phase.

It's the belief at Econblog Review that under the guise of "free markets", we are experiencing the most manipulated markets in memory. Thus a commodity as huge and generally stable as oil can rise rapidly from $70 to over $140 per barrel and collapse to $35 in a short time. Thus a giant company with a stable funding base, BofA, can have its stock drop 95% in 2 years and then surge 6 times in 5 months. Give me a break!

Meanwhile, Big Finance is perfectly set up to allow more looting. The survivors cannot fail; they do not even have to share any significant part of the winnings with shareholders, as even JPM has slashed its dividend and Goldman Sachs never believed in dividends once it went public; their cost of funds is rock-bottom; they are free to repeat the cycle with whatever new variations they wish. Based on the experience of the past 10-15 years, 'anything goes' will remain the watchword.

Copyright (C) Long Lake LLC 2009

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