Wed Feb 24 2010
Wall Street lore has it that no one rings a bell at the bottom. Well Warren Buffet's investing buddy, Charlie Munger, has rung one at DOW 10,300. Writing in Slate, Munger titles his article, It's Over.
He compares America to a giant gambling casino in which 'investment firms' have assumed the role that gambling casinos once did. In the end everyone is betting on stocks and derivatives, who is working?
I wrote a column rather like this several years back, really I did. There are over thirty states with lotteries, including Arizona. But State Parks are closing anyway, Mish today reports that spending is out of control in Phoenix. Only a few years back, Las Vegas was the fastest growing city in the US. It was also the city that produced little or nothing in terms of tangible output, a true 'swap dollar' economy. Now the thirty story condo developments are empty, and the Mayor of Las Vegas is angry at the President for remarks disparaging the city. Gee how times have changed. The values of the publicly owned casinos have collapsed, big time.
In a way, the public unions were gambling that the governments could pay astronomic salaries and retirements. That bet is not paying off either. But the Administration continues to reward his union base with items like purchasing a Illinois State Prison for over $200M to house GITMO detainees. California no doubt looks to Washington DC as its final salvation.
A PEW Study backs me up on this but I do not agree with the Director that this can be solved now with some small steps. The real world use of the word NO is never easy.
From what I understand from the comment above and the article I read from CNBC, it seems that we have this habit of placing bets on our finances where we don't even know what we're betting on. It's like were placing our bids at an empty table while being suckered away from our money. The artilce from CNBC gives an example, they quote; citizens more and more whiled away their time in the excitement of casino gambling," placing "bets on security prices under a system used in the 1920s in the United States and called 'the bucket shop system.'"( Crippen, Alex,http://www.cnbc.com/id/35507246).
I guess I am not really grasping the entire article, can you please inform me more about it?
Posted by: Aaron Avalos | February 28, 2010 at 01:34 AM
Good question Aaron, we will be discussing this one in class, we have seen that Goldman will create a derivative, sell it to a client, and then bet against it, dividend yields are barely 2 % which is not a great time to invest
Posted by: Dennis Elam | February 28, 2010 at 07:46 AM
AS I write FNM has lost more billions and needs more money from the FED to have a positive equity, FRE same story, if they go there will be virtually no one to buy mortgages essentially bringing real estate to a halt
Posted by: Dennis Elam | February 28, 2010 at 07:49 AM