THE CURMUDGEON CHRONICLE ©
AN IRREVERENT VIEW
Time Line: October 14, 2008
Date Line: Flemington New Jersey
The economic climate forecast is for snow, storms, and continuing lows leading to a tropical depression in Florida real estate. To those of us who lived through the period 1929 to 1939 it seems like old home week, but it is not the time to say, “This is where I came in; let me out at the next corner”,
There are no panaceas and the Government has been ineffectual in every regard, but humanity is used to getting skinned alive and has a built in survival mechanism. The thing we are not equipped with is a disbelief system to tell us “it too good to be true”.
Each debacle’s cast may have different names but the scams are essentially the same and the outcomes foreseeable. You can’t get something for nothing but you can turn a dream into a nightmare if you forget that nasty little fact.
We have written about the mortgage crisis, brought about by speculation on a (relative) scale equal to the South Sea bubble centuries ago. People who could not afford to buy a house were suddenly given the keys to one. Banks that had no business betting their capital staked it on wagers that the people would pay their obligations despite the fact they had no money. The regulators hewed to a party line that said, “Cheap money will keep the economic pot boiling and pay for Iraq; lets push that one along.”
The Fed could have stopped the use of “cheap money quicksand” as a building site, but Greenspan was too busy pontificating and a slave to his reputation to say, “This is wrong and we are marching to oblivion”. There is blame enough for everyone directly involved and plenty left over for each of us who forgot that if it is too good to be true, it probably is not true.
Everyone asks where the stock market is heading. It is going up for some securities and down for others. The market rewards companies that provide products and services in demand despite the economic climate. Historically they were food; clothing; energy; medical care; booze; candy, and entertainment. In the modern world we have added technological advances, information and communication services unknown to our grandparents. The scenario for investment looks the same in good times and bad times.
There is less reliance on the “greater fool” theory for profits in bad times but not much greater reliance on yields and safety. In bad times who knows what is safe or that dividends will be paid?
The average family cannot go to ground like a hunted fox. There is food to be bought, children to raise, rent or a mortgage to pay and the trappings of life to deal with if a family is to stay together. In our economic system there is a hue and cry by capital against government intervention grants of benefits as Social Security and Medicare. Those entitlements are give-aways, unlike the $759 billion to be applied to save the bankers and other gamblers who brought down the house of cards they built on that pool of quicksand. Yet, this too shall pass.
When will we know a new day has dawned? For me it is the day when I can buy a towel made in the USA with US cotton, on US equipment, with US labor. Until then I hum the following tune from time to time…
Where have all the profits gone
Long time passing…
Where did all the brokers go
Short time ago?
Gone to the poorhouse
Every one…
When will they ever learn?
Perhaps they’ll never learn.
Howard Stamer
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