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Stock Ideas Investors Daily Edge The Creatures from Manhattan Island
Stock Ideas Investors Daily Edge The Creatures from Manhattan Island 
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Banks Leading Dow Down? Clearly, we can no longer believe U.S. banks when they claim to be done declaring multi-billion-dollar losses. |
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| The Creatures from Manhattan Island |
| Saturday, 25 October 2008 | ||||||||
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Gosh, hasn't life become extremely complex here in the 21st century? There is constant talk of derivatives, hedge funds, nationalizations, bailouts, repos, liquidity crunches, contagion and stimulus packages. How are we ever going to explain all of this to our kids and grand kids? A tip of the hat is due to Edward Griffin and his highly endorsed The Creature from Jekyll Island. It's time to take a look at modern finance in plain English for a change. I'm also a dentist so "tongue in cheek" methods come with the territory. Let's get started as we delve into four major American catastrophes. 1) What in the world is going on with US banks? Stay with me here, it's really not that complex. Some banks, like Bear Sterns and Lehman Brothers crashed and burned. These poor blokes didn't meet the elitist requirements for most favored repairs. They were sent to the chop shop. These non-favored banks had parts with remaining value. They are now attached to various Rolls Royces, Bentleys, Mercedes and Ferraris in the Hamptons. The damaged parts now reside in front lawns across the US. Other banks, like JP Morgan and Goldman Sachs, managed to qualify for loans and financial repairs at the J & J Six-Pack Repair Shop. Apparently, we haven't seen the end of "liar loans". Extensive research has yet to discover any redeeming qualities in the banks chosen for repair vs. those headed to the junk yard.Giving money and power to banks and bankers is like handing out Viagra to rapists. It beats me how you decide who gets the meds and who doesn't. Life just isn't fair. 2) What about the Crimex commodity market in New York? You've read about shorts, longs, commercials, speculators, defaults and naked shorts. Try explaining that to a distracted teenager. No problemo.
Two or three "most favored" banks (see item #1) overwhelmed the market with paper sell orders last July. Gold, silver, oil and multiple essential commodities hit the skids. Just in time to seal off the escape route for concerned citizens trying to get out of regular market carnage. Weren't these bank sell orders on the up and up? Hardly. Here's the scoop. Imagine you're young and innocent and find yourself in a strip poker game (stuff happens). Your enticing poker opponent not so coincidentally knows someone who knows someone who owns a high-end clothing store. In the private Crimex club there are rules that allow specially qualified players to just toss a clothing tag into the pot as oppose to disrobing (#1 again). You, on the other hand, get to remove some polyester, cotton or spandex with each hand lost. Guess who's going home nekked? How do you think they got that clothing store to begin with? 3) Daddy, what is a bailout? That's a tough one. A scant few grownups know that a bailout is the responsibility of trillions of dollars of toxic crap being transferred to the taxpayers and all who hold US dollar investments. You can't say that to a kid. It's more like this, Little Janie… Remember when your older brother racked up nine speeding tickets, totaled two cars, lost his driver's license, chopped down a school tree and got arrested for under age drinking all in a two year time frame? If he were too special to fail, he, also, would get a bailout. You, your friends and all your future children would get to pay for your brother's fines and damages, with compounding interest. Joey gets a Porsche, a liquor store, a stocked penthouse in Las Vegas and widespread authority. All on your tab. You'll just have to find someone to bail you out, Honey. Work extra hard in school, don't get caught when you do really bad things and you just may land a job with JP Morgan some day. These folks never get voted off the island. 4) Mommy, tell me about America. What was a dollar? Sweetie, you remember when we talked about #1…? We'll continue this line of thought on banks next week. The first question will be….Uncle Ray, what is a Zombie? Live and Invest Resourcefully, Rusty
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