For some reason, watching the action on the stock markets and so on this week reminds me of September 11, only in slow motion and without the dramatic visuals. But it’s just as big, just as history-making, and perhaps even more of a disaster.
I actually took all my life savings and plunked them into GICs last December. The mutal fund advisor thought I was crazy to do so, and showed me some Andex charts of stock performance historically and so forth. I know how stocks have performed historically, which is why I wanted out. If you think a big ole’ crash is coming along soon, you get out early and once the dust has settled you wait a while (a longer while than most people probably think) and pick up the bargains that remain for cheap.
I’ve been reading sites like Daily Reckoning and depression2.tv and other bear sites since about 2003 or so. Buffet warned back in 2002 of risky investments like derivatives being financial weapons of mass destruction. I’ve also been reading up on highly leveraged hedge-funds, the commodities bubble and the reckless lending that’s taken place the better part of this decade. I’ve been reading about the likelihood of a big meltdown for about five years and wondering if it was imminent for the past year and a half. I don’t blog on the subject much, but have spent a fair amount of time reading up on it.
And yet people still seem to be taken by surprise, or still try to insist that everything is just fine.
I wonder what impact all this will have on the US elections. One thing that continues to baffle me about American politics is the prevalence among the electorate of the single issue voter. I cannot count the number of times I’ve read people’s comments on various blogs and news articles where they expressed dismay at what Bush has been doing, but still vote for him and his cronies because of their stance on abortion. Or on gay marriage. Screw the economy, health care, the Iraq war, the national debt, crumbling inner cities and infrastructure, what matters most is whether or not two fags in Vermont can get hitched in front of a civil court judge. I mean, where the f*ck are people’s priorities?!?
Okay, rant over. If the US collapse was unable to take the rest of the world down with it I wouldn’t give a crap. I wonder if the average voter understands how bad this really is, or if they’ve become so accustomed to the doomsaying headlines regarding ‘sub-prime’ and ‘credit crisis’ that they just tune it out. But Lehman isn’t only the largest bankruptcy in US history, it dwarfs the now-second largest Worldcom by a factor of 6 to 1. Even scarier is the increasingly likely prospect of AIG going bankrupt.
Still, I find the unfolding disaster fascinating. It’s similar to what George Carlin said about coverage of natural disasters. Only there’s no sense of guilt because nobody’s actually dying. Watching the tickers and the sell-off in the Asian markets last night wasn’t much different than watching the initial reports of an earthquake and wondering how big it will really turn out to be. Will they halt trading tomorrow? How much more can the Fed pump in? Will AIG be bailed out after all, or will their collapse dwarf that of Lehman? Who’s next?
“Private Equity” firms were the subject of all kinds of hype as they swallowed up companies through the middle part of the decade, but keep in mind that it was just the old-LBO or leveraged buyout trend that was big in the 80s. Will one of them be the next to blow up? Or perhaps some big hedge-fund bet the wrong way on commodities? There’s still three trading days to go in this week – until the triple witching hour as they call it, so it should be interesting times.