Monday, 29 September 2008

How Bad?

First off, thanks to everybody who came out to Ed Sander yesterday. Morning registration went smoothly enough, despite an alarmingly hung over station crew. I thought I was in bad shape myself until I say the three amigos roll in. One forgot the alphabet, one kept falling asleep and the other could hold a conversation well enough but not much past that. Anyhow, the race seems like it was a big success and except for a few brief instances (why did ALL of the people racing in Men's 4 with last names starting with G-M decide to show up en masse?) we kept the registration lines wicked short.

While I was out golfing today (corporate schmooze affair), the world apparently cracked. All the indexes got hammered. Although the updates aren't yet on line with the tale of the tape, I feel very lucky to have cut and run on some stuff last week, diverting out of some small cap stuff into a PIMCO fund (ptrax) and a consumer staples fund. Treasuries had a huge run today, and while I don't really feel like it's sustainable, I feel a lot better about owning a fund with a large lot of Treasuries in it when the government backing those bonds is taking a 'wait and see' on writing $700b checks. Also, Bill Gross is a very, very smart man and he manages this fund himself.

Speaking of Bill Gross, he said last week that he was against salary caps for institutions participating in any bailout. I had been pretty violently for them, but upon reading his opinion (for which he gave no supporting argument other than "it's wrong and probably illegal") I decided to reconsider my opinion. Not change it, reconsider it. After reconsidering it, I changed it. Bill Gross has offered his person and company (Pimco) to administer any bail out, for free. This was part of the same article. Okay, so here's a really smart guy who makes absolute piles of money for himself and his employees and his investors, and he says "I'll do this for free." Why? Because without an operating credit and financial market, he's out of the game. He's in his 60s and he's looking long term. So it stands to reason that you could pretty easily tell who's in it to fix the situation and who's in it for themselves pretty freaking easily. Just his offer, sitting out there, makes it really hard for any of these characters to take a payday out of this.

So how bad are things going to get? Probably pretty terrible if something's not done soon. Depending who you ask, something needs to happen like right f***ing now in order for the day to day world to keep operating. Wachovia probably wouldn't have failed if a bailout had come through last week. Is this Armageddon going to swoop down on you an me? Doesn't everything? But in all seriousness, I am further into my corner that objective number one has to be to stabilize the housing market. This is a "drain the swamp" moment - until the housing market is stabilized, every alligator that gets thrown out is going to be replaced with another.

We are past the point of being able to make decisions based on morals. The good guys took it in the shorts. On December 7, I wrote about this - that there would be a bailout, and it would be the people who tried to do good things who would get hammered. I'd like something better than the three page plan that the former Chief of Goldman Sachs tried to foist on us. Wall St. once again seems to be acting like the baby who threatens to throw all of his toys out of the playpen if he doesn't get his way. An 8% or whatever drop in the S&P 500 isn't exactly a good outcome, but a 50% increase in the national debt isn't either. I pulled that 50% # from deep in my shorts so please no nitpicking. Whatever it takes to get out of this situation, and I do think that some intervention is needed, it needs to be based on cold pragmatism. Not Wall St cronyism (which I think is all the one that failed today is - Wall St. colludes to send the markets down as if to reinforce the "we're serious about this, there will be blood if you don't give us what we're asking for" stance), not a bunch of Congress people who will do whatever it takes to stay in office, certainly not a bunch of constituents who want to give the Wall St. tycoons a little whatfer after having stacked their own debts so high they could never get out. I want effective. Is that too much to ask? Unquestionably.

This is going to be awfully interesting, and interesting ain't always a good thing.

I rode with my Powertap again yesterday afternoon. I suck.

Johnny the architect who introduced yourself at registration yesterday, get in touch. Sorry I couldn't talk more, wanted to. Trying to keep the lines down, you know?

1 comment:

John(ny) said...

I'll catch you at another race, or maybe one of the rides, I figured I may as well introduce myself to the people whose blogs I read, so I did.

See you out there sometime.