> Re Doug's quote from "former permabull" James Cramer: "These stocks
> trade as if someone besides the buy side has massive exposure to the
> pieces of paper that must be incredibly difficult to value right now.
> How do you value Indonesian junk bonds? How do you value Brazilian debt?
> Or Venezuelan debt?"
>
> Likewise, there was an article the other day in the New York Times
> stating that major U.S. funds were valuing their holdings of Russian
> paper pretty much by pulling numbers out of the air and were totally at
> odds with one another. So, where's the "magic of the marketplace" now?
> The Invisible Hand seems to be twiddling its thumb. I don't see how
> these enormous dislocations can be occurring simultaneously in widely
> scattered global financial markets without something yet more sinister
> -- read: Depression -- occurring soon.
>
> Your serve, MBS.
Never got into tennis. Couldn't dig the little white shorts. me as a fan of the market is silly. I presume you are referring solely to the depression scenario.
I suspect you are young. I do not mean ignorant or uneducated. Just young, meaning some lack of experience.
I've been hearing predictions of financial doom EVER SINCE I became politically left, in college, in the 1960's. The prophets always have a list of world conniptions as "data," overheated rhetoric, obscure theory, intellectual arrogance, and a political agenda which depends on their prediction. (Guess which came first?)
It's a longstanding cottage industry. Hence one reason for my skepticism about more predictions. there were tumultuous events in the 1970's too, and an entertaining book called "The Crash of '79". In the early 70's a Stanford prof named Paul Erlich announced with great confidence the imminence of gross shortages of basic resources leading to economic calamity. After you hear this stuff for a long time, you learn to relax.
On why the system can fix itself, I would refer you briefly to Keynes. The govt can create money and keep the economy afloat, since as most agree the basis for a collapse is itself 'artificial' in the sense of a financial foul-up, not one of the material means of production (excluding the ecological disaster scenario). Such repair is not necessarily simple or sure to succeed.
Expectations of imminent collapse which are not met are often followed by political demoralization and inactivity, or by what LP has called 'mutation' of left into right. A better working assumption is that this is a long haul. A collapse is possible and will bring dangers and opportunities, but the real challenge is dealing with the routine.
To habitually predict imminent crisis for decades takes too much dedication.
Cheers,
MBS