Monday, March 24, 2008


GETTIN’ OFF THE GRAVY TRAIN: An article in today’s Honolulu Advertiser today tells the story of a couple, LaDonna and Kurt Shively, who were scammed by their bank into investing their life savings in what the article calls “auction-rate securities”, another one of those creative wording products that described the creative mortgage products that unraveled and laid bare in the so-called “sub-prime mortgage crisis” described as such by the mainstream financial media.

But it’s really a lot simpler than most people are willing to admit- the couple was one of those left holding the bag when the housing bubble burst.

Yes, that’s what happened. That doubling and tripling of real estate and homes in the early to mid ‘00’s that people were told was some miraculous glitch in the market where the prices of homes would continue to go up, up, up forever turned out to be a big fat lie... imagine that.

Yet all we hear today is convoluted terminology from every money-bunny and pecuniary-pal buddy from Batoloma to that screaming bald guy. Unsecured security, arbitraged annuity, stated-income liar-loan, interest only investment, government-backed money-expansion and circle-jerked investors aside, you never hear the term “the bust that followed the boom” used in the financial media.

Because then we could understand it and they wouldn’t have their jobs explaining to us how hard it is for us to understand.

And when all is said and done many of them blame the victims of scam-loans rather than the banks and Tom Wolfe’s Bonfires of the Vanities “Masters of the Universe” on Wall Street who left everyone like LaDonna and Kurt at the end of the line holding the empty bag..

But although the housing bust has yet to really slash and return prices to a sane level where they were a few years ago we hear the article and the rest of the CNBC- FFN- CNNF-WSJ-crowd quoting mumbo-jumbo from banks and sundry investment scammers telling us “now is not the time to panic”.

And we all know what to do when we hear that... PANIC!.

Any sharp five-year-old can tell you money and finance is based on nothing but the mass hallucination that things are worth what we all think they are. There is nothing but belief backing up financial markets and once someone convinces the hundredth money-monkey that their crap ain’t worth crap anymore- poof... it isn’t.

But my point- and I do have one- is that there is something to understand here and, unlike the rest of the financial media PBS reporter Paul Solman usually cuts through the miasma and has done another of his masterful jobs of explaining it all.

We wouldn’t presume to be able to paraphrase or even quote him well enough to explain what he explains so watch it for yourself – or at least read the transcript.

Solmon doesn’t really reveal the core of the bust he does make it’s derivation simple enough so even fiscal dullards like us can figure out how it happened..


Anonymous said...

Lucky, I guess, for those of us who are too broke to even be in the game in the first place; this
isn't going to be too big a shock to us. But it will turn into the biggest
transfer of wealth from the working class to the rich in memory - no doubt about
it. And many many already struggling families will find it harder than ever to
keep pushing the boulder uphill.

"Busts" don't seem to work out so badly for the folks who see their
wealth reduced from, say, 100 million to 95 million. The are actually able to take
advantage of the bust, buy things up at pennies on the dollar, and come out ahead
down the road. It's a straight-foward matter of concentrating the wealth.
This is what you get when you let "the market" take care of everything. No wonder that idea has such powerful boosters!

Anonymous said...

Oh, that was from me. Sorry!

Anonymous said...

Maybe they should have invested in oil futures (haha).

Hey, wait a minute - aren't these people "greedy capitalists?" Since when do you guys shed a tear for a couple of developers who need to park 300 grand in liquid assets?

Andy Parx said...

Aw, Charley- we do care about you little wanna-be capitalist piggies when biggest piggies rip you off.. Our hearts would pump dirty dishwater for ya.

Anonymous said...

It's good to know you've got my back, Andy. It's more likely though that you're willing to press them into service as victims in a pinch, but normally you'd rip on them as greed-heads.

Andy Parx said...

I have nothing against people who worked hard all their lives and accumulated $300,000 and has to do something with their money other than keep it in their mattress. And when the bank, of all places, scams them into highly risky securities and doesn't reveal the real risks that's illegal and yes, then I've "got yer back".