Fed Halted a Financial Chernobyl?
That's what London's Daily Telegraph reported about the Fed and JPMorgan's recent bailout of Bear Stearns. Funny that we don't see this type of reporting in the American financial media.
"If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital. There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system."
"We've been worried for a long time there would be nobody to pay on the other side of our contracts, so we took profits early and got out of everything. The Greenspan policies that led to this have been the most irresponsible episode the world has ever seen."
That says it all for me. I don't claim to fully understand credit swaps and this 'daisy chain' of derivatives. But I know that bad things happen when you borrow, spend and speculate too much. It's bad for a household, company, and especially a country.
At all three levels, Americans are carrying a crushing debt load. It's just a matter of time before this house of credit cards, auto loans and ARMs comes tumbling down. If you're a savvy investor, and go into precious metals, put options on most American stocks (and call options on gold, silver and crude oil), and purchase physical gold and silver... you'll be fine.
If you listen to CNBC or your stock broker, and stay in stocks for the 'long-term,' you'll be in a world of hurt. Reduce your debt load, get financially literate, and learn to sell and market. I know I've said it before, but I can't overemphasize the importance of this advice. Job security today is a myth. I just talked with the father of a 40-something guy from my hometown who works for a big telcom company.
Been there for 17 years, but the company's in bad financial shape. He's worried about his job being next on the chopping block. Another friend of a friend works for an office supply company, who's in negotiations with another company about a buyout/merger. And he's concerned about his future with the company.
I hear these stories over and over again - and with intelligent, competent, hard-working folks. The 'safe, secure American job' with good benefits is pretty rare nowadays. Almost as big of a myth as Bigfoot or the Loch Ness Monster. That's why I preach over and over on the importance of reading (and understanding) what financial statements mean; and learning to sell and market effectively.
If you can sell in person or in print, you're VERY valuable to a potential employer. You also have an important skill to use if you want to start your own business. I hope everyone had a great Easter, keep your eye on the financial stocks. If you invest in these companies at all, I'd recommend longer-term put options as the only way to play them.
"If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital. There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system."
"We've been worried for a long time there would be nobody to pay on the other side of our contracts, so we took profits early and got out of everything. The Greenspan policies that led to this have been the most irresponsible episode the world has ever seen."
That says it all for me. I don't claim to fully understand credit swaps and this 'daisy chain' of derivatives. But I know that bad things happen when you borrow, spend and speculate too much. It's bad for a household, company, and especially a country.
At all three levels, Americans are carrying a crushing debt load. It's just a matter of time before this house of credit cards, auto loans and ARMs comes tumbling down. If you're a savvy investor, and go into precious metals, put options on most American stocks (and call options on gold, silver and crude oil), and purchase physical gold and silver... you'll be fine.
If you listen to CNBC or your stock broker, and stay in stocks for the 'long-term,' you'll be in a world of hurt. Reduce your debt load, get financially literate, and learn to sell and market. I know I've said it before, but I can't overemphasize the importance of this advice. Job security today is a myth. I just talked with the father of a 40-something guy from my hometown who works for a big telcom company.
Been there for 17 years, but the company's in bad financial shape. He's worried about his job being next on the chopping block. Another friend of a friend works for an office supply company, who's in negotiations with another company about a buyout/merger. And he's concerned about his future with the company.
I hear these stories over and over again - and with intelligent, competent, hard-working folks. The 'safe, secure American job' with good benefits is pretty rare nowadays. Almost as big of a myth as Bigfoot or the Loch Ness Monster. That's why I preach over and over on the importance of reading (and understanding) what financial statements mean; and learning to sell and market effectively.
If you can sell in person or in print, you're VERY valuable to a potential employer. You also have an important skill to use if you want to start your own business. I hope everyone had a great Easter, keep your eye on the financial stocks. If you invest in these companies at all, I'd recommend longer-term put options as the only way to play them.
posted by Brian Ochsner | 8:47 PM
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