Short, But Not Sweet

When it comes to the world of business and finance, it sometimes takes tens of thousands of words to explain what is going on. Other times, it might only require a few carefully chosen sentences. In a post entitled "A Bear’s Moan" at his New York Times blog, Floyd Norris: Notions on High and Low Finance, the newspaper's chief financial correspondent highlights some brief, though very informative thoughts from a strategist who actually knows what he is talking about.

This has been a frustrating time for bears, who see disaster all around them — except in stock prices.

James Montier, an analyst with Societe Generale in London, has published what may be the ultimate scream of frustration. Entitled “Road to Revulsion,” it argues that bubbles end in total investor despair.

Here is the opening paragraph of the report:

“We have seen the heads of virtually all financial institutions stand up over the last few months and claim the worst is behind us. Whe would anyone listen to those people? They didn’t see the disaster coming, and yet somehow they are qualified to tell us it is alright! Perhaps I am just unduly sceptical, but this reeks of a conspiracy of optimism. The recession has barely started, let alone reached its nadir. The market moves of late have all the hallmarks of a classic sucker’s rally. This isn’t discounting the recovery, this is denial! Far from being behind us, the worst may still lie ahead.”

Comments

[dome]

Personally, I am surprised that Mr Montier is so surprised.

The best description of such behaviour by "the heads of virtually all financial institutions" is given in JK Galbraith's book "The Great Crash" - he calls it "preventive incantation"

"Preventive incantation required that as many important people as possible repeat as firmly as they could that it (recession) would not happen. This they did. ...... As an instrument of economic policy, incantation does not permit minor doubts nor scruples."

Exactly the same process is being conducted in 2008 as it was in 1929, 1930 etc.

Regards
Dome

[Truesincerity]

Reality is just making fools out of each and every last one of them. The dire state of the economy permeates so badly that it is blatantly obvious these "experts" lack any wisdom. It makes them look rather delusional instead of optimistic.

[On the losing End]

Oh, the trash they are hiding: Taxpayer,screwed!

U.S. Currency Is Now Backed by C.D.O.'s

Since the onset of the banking solvency crisis and the establishment of various new lending facilities by the U.S. central bank, however, an increasing portion of the U.S. Treasury securities held as collateral has been lent to troubled financial institutions in exchange for largely illiquid collateralized debt obligations — including mortgage backed securities — that now total in excess of 20% of the collateral backing the Federal Reserve Notes.