Dr. Housing Bubble 03/06/09

[Crewleader]

The Modern Banking System is Like a Broken Dam: At 8% Annual Compounded Growth it would take us 11 years to reach the Peak of the S&P 500. Old Ideas and Prophets Falling Hard.

Before reading this article, I would like you to take a deep breath. Okay? If you feel like candy bursting out of this broken economic piñata, you are not alone. Things are dire and virtually every piece of news we read reinforces this premise. On Wednesday, we had a nice technical rally and you should have seen the glimmer of hope in the eyes of those on the cable financial shows. We all want a recovery but a recovery based on hard work and getting back to what is financially prudent. Not the talking heads. They could care less about the ADP employment report that showed 697,000 jobs lost in the month of February. All they cared about was whether a handful of gluttonous financial stocks moved one or two points because the U.S. Treasury and Federal Reserve are intravenously pumping capital into the veins of these flailing institutions while allowing the American taxpayer to flounder like a carp yanked out of the stream.

The poorly planned Troubled Asset Relief Program (TARP) of 2008 has been a complete boondoggle. How have things gone in the stock market since the TARP came about? Well let us take a look:



Since TARP version 1.0 was signed into law on October 3rd, 2008 the S&P 500 is down approximately 38%. Think about this for a bit. We are talking about 5 months ago and the market has shed nearly 40% of its value. From the 2007 peak, we are now off by a mind boggling 56.4% putting us back to levels not seen since 1996. Can you even remember what you were doing back in 1996? In 1996 here in Santa Monica the civil tiral of O.J. Simpson was beginning. We are now past the lost decade estimate at least in terms of equities and this puts us in the realm of witnessing our own lost decade similar to Japan. The unfortunate thing is we followed many of the policies that Japan did with their failed banks yet expected a different result. People are now claiming that stocks are a bargain. These people were cheering the market on Wednesday only to get reamed on Thursday after Citigroup went into the penny stock territory and the survivability of GM is now in question. If you haven’t figured it out yet, the mainstream financial pundits really have very little knowledge regarding economics. What they are good at is hyperventilating like a hypochrondiac entering a hospital when the market is up or down.

http://www.doctorhousingbubble.com/the-modern-banking-system-is-like-a-broken-dam-at-8-annual-compounded-growth-it-would-take-us-11-years-to-reach-the-peak-of-the-sp-500-old-ideas-and-prophets-falling-hard/

[Warpy]

1. "Hyperventilating like a hypochondriac"

Gotta love the doctor, nobody can skewer the bloviating idiots on CNBC the way he can, Stewart should be taking his stuff instead of the other way around.

He's also right about the broken dam analogy. Continuing to throw good money after bad is simply not going to solve the problems caused by all that fancy paper in the banking system's asset column. Only nationalization, purging that paper, and returning to sound and heavily regulated banking practices will save the system, returning banks to the private sector only when they can stay in business legally.

It will be done eventually, but it's a politically risky move. People are going to have to be convinced of the magnitude of the disaster before they will accept that kind of "socialism."