In the meantime, we pass along this from Julian H. Robertson, one of the smartest people in the hedge fund industry. The economy is headed for one “doozy of a recession”, says he.
Colleague Steve Sarnoff adds his two cents on the latest market happenings, saying, “Stocks slipped sharply on Friday and this morning, as disappointment, worry, and fear over housing, credit, currency, recession, and inflation spread like southern California wildfire. The financial media fans investors’ fear through the markets like Santa Ana winds funneling fire through dried out coastal sage and chaparral canyons.
“Prices move naturally from resistance to support and that is simply what is going on here. The pressure is on over the near-term, but watch how the news will change (sudden easing of fears) once technical support (demand) comes in.”
Here’s our old Fed chief, Alan Greenspan, commenting on the effects of the credit bubble that he, more than anyone, created:
“The financial crisis that erupted on August 9 was an accident waiting to happen,” Greenspan said in a speech yesterday. “Credit spreads across all global asset classes had become suppressed to clearly unsustainable levels.
“Something had to give.”
Well, yes. Something has to give. We’ve said as much ourselves. Then again, we didn’t control short-term interest rates during the long period in which pressure was building up. We weren’t the ones with our hands on the credit throttle, shifting the lever to ‘Full Speed Ahead’ – even as the rivets began to pop. And we weren’t the one who reassured the public that all would be well, either.
But Alan Greenspan is a marvel. We admire him. Who else would have the chutzpah...the gall...the cheek?
He continued: “If the crisis had not been triggered by a mispricing of securitised US subprime mortgages, it would eventually have erupted in some other sector or market.”
He makes it sound as though he played no part in it...as if it were an act of God when a credit expansion comes to an end. And then, he adds a warning:
“If the pernicious drift toward fiscal instability is not arrested and is compounded by a protectionist reversal of globalisation, the current account adjustment could be quite painful for the United States and our trading partners.”
That Greenspan! What a character! If the authorities don’t get control of this thing, he says, it could hurt.
Bill Bonner
The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Market Socialist Dude on 23 October 2007:
What we are seeing is a crisis caused by a deep contradiction within the global political economy:
- Economic stability depends on growth, which in turn relies on ever growing consumption
- Real wages are stagnant because of the artificial separation of labour in a world where capital is globalised.
Thus, the only way to get workers to keep increasing their consumption is to drive them into debt.
Comment by Coffee Addict on 24 October 2007:
With US credit cards taking up the consumption slack from no doc loans, the bite will come after Christmas. Those January statements really will bite them!
Key points:
1. Global consumer markets are not going away - thanks goodness!
2. The US will have no need to insulate itself from cheap imports though regulation - the devalued USD will do it for them.
3. Greenspan correctly identifies the sub prime crisis as a symptom not a cause.
The 1987 "correction" was worstened by computerised sell orders. Today, investors brains seem to be infected with the same old software - buy and sell orders are set to automatic and governed by the three wise monkeys.
Oh .... workers drive themselves into debt as a consequence of greed and the six other deadly sins. The Government's those workers elect are not primarily responsible, though they do reflect the attitudes of their constituents.