2 replies to this topic

[thespookyone]

Mark, I noticed in the thread you posted below, that you regarded th Feds changing of rules,visa-vie the two large banks (and probably others,imho) to be very bullish. While I certainly see how this can be quite bullish short term and somewhat IT, I have some questions I think you can help me with. Allow me to preface my questions by saying that I recieve your morning letter every day, and love your market approach. Above and beyond your degrees, you display an obvious and deep understanding of economics, and I respect your opinions more than I can say. Do you feel the rules were antiquated, and that the change should have been made anyway? Am I missing something, or are we adding more risk into the system changing the way our institutions are free to operate? Is this not a response to mistakes that have been made, and if more mistakes are made with this increased leverage available-doesn't it leave the door open for some massive problems? It seems like the banks knew what system they were operating in, should I be unconcerned that they now need rule changes to facilitate a course that will presumably help clear things up? It seems to me that the more sound players in the banking industry have had their business affected by the weak ones, and are doing what they can to straighten this mess out-so that they can get back to business-while possibly taking advantage of the situation by picking up assets at what they percieve to be undervalued levels in the process-is my take wrong? Thanks in advance, Spooky

[OEXCHAOS]

Mark, I noticed in the thread you posted below, that you regarded th Feds changing of rules,visa-vie the two large banks (and probably others,imho) to be very bullish. While I certainly see how this can be quite bullish short term and somewhat IT, I have some questions I think you can help me with. Allow me to preface my questions by saying that I recieve your morning letter every day, and love your market approach. Above and beyond your degrees, you display an obvious and deep understanding of economics, and I respect your opinions more than I can say.

Do you feel the rules were antiquated, and that the change should have been made anyway?

No. I make no judgement other than to note that that's going to mean that there's going to be tons of liquidity out there. Either it's going to shore up those MBS's, which will stablilize things, or it won't, in which case it'll have to go somewhere, which will mean that some of it will be going into stocks.

Am I missing something, or are we adding more risk into the system changing the way our institutions are free to operate?

There's risk in any action. This one, however, is a complex and huge problem and it requires a dramatic banking set of solutions. Is it the right one? I'm simply out of my league on this one.

Is this not a response to mistakes that have been made, and if more mistakes are made with this increased leverage available-doesn't it leave the door open for some massive problems?

Any mistakes won't be worse than a total melt down of normal, sound, lending. That destroys the capacity to create wealth, and creates UNECONOMIC dislocations.

It seems like the banks knew what system they were operating in, should I be unconcerned that they now need rule changes to facilitate a course that will presumably help clear things up?

The banks DIDN'T know what had happened, exactly. The game changed. They and the Fed weren't the only players. The thing that's going on now is the Fed is giving them the power and support to take over the economic and make sense operations of those non-bank lenders (I think).

It seems to me that the more sound players in the banking industry have had their business affected by the weak ones, and are doing what they can to straighten this mess out-so that they can get back to business-while possibly taking advantage of the situation by picking up assets at what they percieve to be undervalued levels in the process-is my take wrong?

Thanks in advance,
Spooky

I think that this is largely true. If I had time to dig deep, I'd be looking at the big players and their connections and see if I couldn't figure out who the preditors are. I'd be buying them for the longer term play. Probably a triple of we avoid a Bear (I think we will).

Thank you very much for your kind words, and for forgiving my morning typos. I hope I'm helping you play this thing reasonably well.

Mark

[thespookyone]

Mark: Thanks for your valuable insight! Your answers were honest, and to the point. As for your typos in the morning-your analysis is so balanced and worthwhile-I've never even noticed a typo, lol. Spooky