3/11/2013 6:00 PM ET|
Wall St. is rigged. Profit from it
Hubris nearly doomed the financial system. Railing against bailouts felt right, but you also should have bet the system would rally anew.
Our system is rigged. Unfair. Hopelessly neglectful of the little guy.
All true. But do you really have a better choice? Did you honestly think Washington was going to let it all fail -- and for good? After all, who's backing Fannie Mae (FNMA) and Freddie Mac (FMCC), which are almost single-handedly backing the resurgent mortgage market? Who pumped more than $2 trillion into suppressing interest rates to record lows?
This is the lesson we should all be taking as the Dow Jones Industrial average closes at yet another record. It's the lesson of how Wall Street traversed the Great Recession, after it survived (and thrived) past Washington-ameliorated crises such as the collapse of Long Term Capital Management and the Savings & Loan imbroglio. You could -- should -- shake your fist at all the bailouts; the record bank profits that are once again accruing to shareholders and executives; the asymmetry of rescuing now impossibly large institutions when so many individuals had to mail back the keys to their homes. But, in 20/20 hindsight, it was also smart to hedge that runaway cynicism with confidence that the system would take care of itself.
In other words, you should have bought in, literally.
Yes, food stamp use is also at a record high. Chronic unemployment borders on permanence. Real medium household wealth is at a decade low. Equity abandonment hit historic levels well into last year. Even with this week's market milestone, nearly six out of 10 Americans still think the country is in recession. So what, signal the largest banks. After the Big Six's second-most-profitable year on the books, their investors are primed to enjoy more than $40 billion in dividend increases, Federal Reserve preferences be damned.
You pretty much knew this swagger was back a whole year ago, when JPMorgan Chase (JPM), the biggest U.S. bank, blindsided the Fed by announcing its dividend hike two days before Ben Bernanke & Co. thought the news would go out. Never mind the fact that the London Whale was at the time blowing a hole in the bank's income statement; the real statement here was Morgan declaring to the Fed, "You're not the boss of me anymore."
In retrospect, Wall Street has disproportionately benefited from the largesse of economic policymakers, from easy TARP terms to a long-stretch of largely free consumer deposits. But you knew it would, didn't you? And you had the power to profit off of that knowledge -- assuming, of course, that you had the money and the stomach lining to survive the meltdown. Cut-rate exchange-traded funds, after all, are not just the province of the ultra-rich. You could have set aside some indignation and bought a simple bank ETF that has tripled in four years. Too many of us were able to make such a bet but couldn't quite bring ourselves to stop worrying and trust the system, however unfair it seemed.
Now, we see housing ascendant again. Corporate profits are breaking records, thanks in no small part to a Federal Reserve -- the wealthiest bank in the world -- hell-bent on seeing both things happen.
"At least the first part of this rally is a rock solid foundation," remarked financial blogger Barry Ritholtz. "The second half, the argument goes, is built on inorganic matter, primarily Fed liquidity and generosity." By his estimate, the Dow would be 20% to 30% lower, absent the Fed's finger on the scale. "You cannot," he said, "understate its impact on corporate earnings."
March 9, 2009, was, it seems, that once- or twice-a-generation moment when the market completely capitulates. I remember it well because it was the same week that a pair of BusinessWeek staffers summoned me to their stretch of the newsroom to ponder the new Great Depression and all the damage it would exact. One liquidated her 401k. The other somehow kept the faith, and she and I have since been revisiting that moment of truth every week -- the better to navigate the next one.
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My parents lost their home and have to move back into an old house (they weren't able to sell it for its value and opted to keep it and rent it out) They lost over $150,000 value on both houses in the economic crash and they were the lucky ones. Most didn't have a previous home that they could fall back on. Did the US Government give them 2 cents? No. The Government bailed out the ones responsible for the crash! The Middle Class is dead. Did the US Government care? Hell no. It was too busy bailing out Corporations who are the the only ones that can be expected to pay SOME of the Government's mindblowing deficit spending. The Corporations and Government collectively embrace the idea that they are both too big too fail and they'll throw us all into the grave before they would dare suffer their face being brought to the ground in shame at finding they're wrong.
They screwed us all.
In the words of (possibly) a hundred of millions and more: Choke and die you bastards!
look Paulson is incredibly stupid and he is also an idiot.
Maybe he wants to help other imbeciles like morons who run Freddie mac
I offered to pay 10% above the property value cash payoff for a condo secured by Freddie Mac but because Freddie Mac was run by an incredibly stupid ceo they did not take me up on the offer. Therefore I made no payments for a year and then Freddie Mac had to unload it for 50% of what I offered Since Freddie Mac is run by idiots they felt that was smart
Paulson felt it was good for tax paying $8/hour employees who work at Macdonalds to subsidize very stupid decisions and million $ salaries of CEOs at banks
I guess Paulson realized that since he is very much a moron that taxpayer should help other morons like ceos at Freddie Mac
30 years ago the Dow was under 1000.with all the crap that`s happened in the
last 30 years, the bears are right.It`s rigged:to go up.
I found out that not a penny of our federal income tax goes to the Gov't but instead is used to pay the interest on the money printed and loaned out to the US by the fed. Does any one see the problem with this? If the fed was abolished and the treasury coined our money as the Constitution states, then the income tax would vanish. Wow what a concept. We have been slowly robbed of our savings and retirement by the banksters. When will all of us wake up and force our local politicians to work for us. Forget about the federal gov't for now. We must get to the ones we can control by our vote and work with the ones that see what our gov't has become.
If anything... now is the exact WRONG time to be in the markets. They are meaningless. I think it is really important right now to step back and examine what Bernanke is doing to the Dollar. He isn't helping it at all. He is diluting it toward insolvency. Knowing this, you have to look past today ahead to what happens next. Will the government suddenly declare that an electronic currency replacing the Dollar restores balance and thwarts corruption? If so, don't believe it. Will they say STOP but we have to give the psychopaths in hallowed roles extra credit points because they are there when the world as we knew it came to an end? If so, vote against it. Will Euro and the BRIC nations collapse and send the world into a massive downward spiral? Possibly. If so, what have you done to prepare for some down time (not prepper level)? Our banks are dead to the world-- they do not function for us any longer and the Federal Reserve certainly isn't helping anyone other than it's member banks. Wall Street is just an irresponsible college kid with a record of causing mayhem for the fun of it. We have all been on this ride too long. We have always had the power to stop this. I could write- how- right now but I will default that to the little voice in your head that's been telling you how for some time now. Listen. If you can't hear it, you are mighty far from commonsense at a time when being so is literally the worst place to be. Listen again and harder this time.
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