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Thanks for the interesting blog. But could someone answer me:
1)Why the world should
be so obsessed and affected with what 300 mn Americans have done or not done?
2)What is the real loss in asset values worldwide?
3)At the cost of some free market freedom, can not regulators look at topping out of maximum values that any equities/ financial products can fetch in the marketplace based on certain fundamental ratios - limit the reward - limit the risk- at least the present generation cannot squander away the opportunities of future generation and leave them in utter penury.
4) I think this is the best time people would listen to the bad words like responsibility , discipline and austerity.
(1) The US has the lions share of world GDP and large trade deficit implying that the rest of the world has suckled off its growth. A downturn in the US spreads, as those who thought de-coupling was an idea found out..it was an idea, a bad one.
(2) I'm not going to to tote it up for you sorry. But European stocks are down by more than 40% from year end, Japan's Nikkei is off nearly 48%, Russia by 73%...and so on. Housing losses quite apart from securities losses are huge, on the order of 20% in the US and UK and headed for perhaps 30%. It's another large number.
(3) The Fed has taken the Freddie Prince approach to asset market regulation to date (It's not my job!). But the sense is that that is changing. When you believe in your GOD (THE MARKETS) you do whatever he says. Only after you have ceased to become a TRUE BELIEVER do you second guess him. The Fed is there now. Markets no longer are worshipped as they once were but theyare still revered. That's why banks are not nationalized after all they have done and even after capital injections no one is treally telling them what to do... We'll have to wait to see what the Fed does. Do not expect any pat rules.
(4) Good joke. Responsibility, discipline and austerity... Those are for other people right? John Thain was still looking for a bonus after Merrill's near collaspe. John Mack (Morgan Stanley) says it would 'look bad' to get a bonus this year. No John. It would be WRONG!. It wouldn't just look bad. What Wall Street CEOs fail to face up to is that it's not just this year when the chickens came home to roost that is a problem for them. They should be held accountable for the past few years in which they were paid obscenely for creating the paper that has destroyed our way of life. Instead, they got HUGE bonuses...and they still want more. They still don't see why they should not get paid for doing that. Wall Street's bonuses have become ENTITLEMENTS. They are de-linked from performance. GIMME GIMME GIMME Goldman's bonuses were down 45% from last year: average comp there was just short of $400K. Really bad year eh? NO. No one is ready to hear those words. And after cranking all that money into banks the Treasury capital injections do smack of some favorable treatment so hasn't moral hazard been nurtured here? Who is at risk other than those who have lost money as investors? Not CEOs. Few were sent packing (OK Fuld). Fannie and Freddie bosses were sent way with money in their pockets. They even came back to testify as did Franklin RAINES the old Fannie Mae boss under Clinton ...after all his scandals. He came back to testify as a wise man.
Austerity...austerity, now there's a good one...