Friday, September 19, 2008

A Small Epiphany

I just had a "lightbulb moment". That's when you can almost see the lightbulb turning on!

I will rightfully credit Ender at USA Gold for helping me throw the switch.

You see, this bailout has troubled me from a free market perspective. I know there's something wrong with it, but I just couldn't put my finger on it. I just realized, it is the overpaying of the American taxpayer for a bunch of toxic shit that the market has been frantically trying to clear!

I couldn't say it better than Ender when he says, "Every ‘money manager’ in the world knows that the structured contracts have a Marked to Model price and a Marked to Market reality. These numbers are not the same and, in most cases, not even close. In an effort to prevent collapse, there is a Marked to Model bailout in the works. This will be discounted by the world."

You see, all these firms have been clearing out their toxic SHIT by selling it at market prices. Sometimes that was as low as 5 cents on the dollar.

But now.... NOW.... Joe Sixpack comes in and offers to buy this SHIT at "marked to model" prices. That's right. You, me and every other taxpayer is now overpaying for worthless SHIT.

What does that do to a market? Well, that raises the price. Why would, let's say Morgan Stanley, now sell a MBS (mortgage backed security) to, let's say Barclay's for 20 cents on the dollar when it knows it will probably get at least 65 cents on the dollar from you and me? They won't! So the price has just TRIPLED.

Now, if you are Barclay's, and you have a hundred million US dollars to spend, do you spend them on an MBS at 325% of it's true market value? Or do you spend it on GOLD, which is only $870 an ounce right now? Which is a better value?

As Ender puts it:
"Oil will be overwhelmed.
Gold will be overwhelmed.
All commodities will be overwhelmed.
The dollar will be shunned.

The dollar will be found wanting.

There is NOTHING more valuable than a full pantry and the ability to honor your contracts right now."

This is hyperinflationary, dollar negative and gold positive all at the same time! So where do you go with your money? Why, into the financials obviously. Morons.

Here's the link to the above referenced post on USA Gold.

2 comments:

Dave said...

But of course! You don't think these well connected fat cats are going to suffer losses needlessly, do you? That was the gist of my essay titled Nationalizing Risk, Privatizing Profit (http://daveeriqat.wordpress.com/2008/05/26/nationalizing-risk-privatizing-profit/).

One wonders what the consequences of all this monetary profligacy will be, though. Increasingly I find so-called "investors" to be brain dead. The more the government bails out fat cats, the more these people cheer. And it's not just the Americans who seem brain dead, either. The countries that continue to lend our country money seem equally impaired.

Dave

Motley Fool said...

Lmao.. yep, morons. xD

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