Cured!
September 22, 2007 7:51am by Barry Ritholtz
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Shock & awe? Or shockingly flawed?
Mr. Mauldin has just put up a new piece: “Sea Change at the Fed
by John Mauldin
September 21, 2007”
Anybody can get it, because everyone knows where his website is… unless you’re a Neanderthal and trying to figure out how to italicize “Cruelest” with a mastodon’s rib bone. For the Neanders among us:
http://www.frontlinethoughts.com/
He takes a look at Mr. Mishkin’s Jackson Hole paper in which Mr. Mishkin apparently does 2 things: he attempts to justify 1)- FOMC inaction, or benign inability, to prevent bubbles, and 2)- FOMC preemptive aggressiveness in reacting to bubbles when they collapse. Of course, to Mr. Mishkin’s credit, he allows that reaction to bubbles ought to be begun when it is perceived that they are about to collapse. I must inject that in the case of the housing bubble, the FOMC had the perception of a sack of hammers, witness Mr. Greenspan’s recent “I just didn’t get it.”
My opinion is that all Mr. Mishkin does is to i-n-t-e-l-l-e-c-t-u-a-l-i-z-e a mechanism for allowing the FOMC to ignore its responsibility for stabilizing prices (inflation). I’m not saying that was his intent, mind you, but just that it seems to have been the net message conveyed in light of the topic of discussion at Jackson Hole. I don’t doubt Mr. Mishkin’s integrity or his veracity, just his analysis.
Read the stories… see the pictures. They are pictures of what a bank run looks like. We haven’t had these on a large scale since the Great Depression years of the 1930s. I certainly hope we don’t have any more outbreaks like this, although it’s certainly possible. These are the direct responsibilities of central banks throughout the world that had probably gravitated to Mr. Mishkin’s permission slip type mechanism for staying home from school, playing hooky:
http://www.thefreedictionary.com/hooky
Bank runs come from shocks… SHOCKS!… they don’t come from recessions. Market participants have time to adjust to declining asset prices and earnings that are the ordinary effects of the business cycle. They have only one means of reacting to shocks that result from inattentive regulators and central banks, and this is it:
http://tinyurl.com/27gh4g
http://tinyurl.com/2cbww5
http://www.youtube.com/watch?v=I20lMyYW83E
http://www.youtube.com/watch?v=LRqBGk_FBmk&mode=related&search=
You can read my work posted on this blog regarding “The Perceived Liquidity Substitution Hypothesis” and you’ll learn what ultimate detrimental effect shocks like this can have on what little effectiveness monetary policy still has at present.
—
BTW, that Mr. Mauldin!… What a nice man he is (I don’t know him). Intelligent, analytical, responsible, successful, patient, purposeful, realistic… he’s a good father I know from reading what he writes, and a good friend too I’m sure. Congratulations Mr. Mauldin on being a good example. It would be great if Congress and the rest of government were stationed by many like you.
Cured, but not saved and not absolved!
A random walk through Wall street Logic
Who will remember that In May June 2007, the equities markets were ebullient and finding their justification through the numerous acquisitions and merger which were taking place at the time?
Sources CNN
« KKR, Goldman pull out of $8B Harman buy
Private equity groups say a ‘material’ change in the audio equipment company’s business has occurred and they are not obligated to complete the merger
KKR on Friday had success in attracting investors to a $5 billion loan used for its acquisition of First Data Corp. ) Initial reluctance by Wall Street caused the buyout shop to lower the amount of its borrowing – and come out with an initial $5 billion instead of an original plan to raise $14 billion
The credit crisis caused four of Wall Street’s top investment banks to report this week that it wrote-off some $4 billion of loans during the third quarter. In some cases, the banks weren’t able to find funding for the loans – or they plunged in value as investors retreated. »
There has also been a number of reports that major investment and retail banks have approached private-equity firms about calling deals off. The banks have offered to pay the break up fee to keep the large loans off their books. 
A much more difficult random walk through Wall street « calculus« .
Who will remember the Goldman Sachs CFO surprise and sadden declaration on the state of the mortgage derivative markets « An abrupt downfall of 24 standard deviation »?
Global Alpha fund (GS) is down 40 Pct within a year and Golman Sachs (courtesy of the mortgages loans derivatives) has posted stellar performances through their dealings on the short side of the mortgage loans derivatives (source Bloomberg)
Cured, but not saved
A random walk through Wall street Logic
Who will remember that In May June 2007, equities markets were ebullient and finding their justification through the numerous acquisitions and mergers which were taking place at the time?
Sources CNN
« KKR, Goldman pull out of $8B Harman buy
Private equity groups say a ‘material’ change in the audio equipment company’s business has occurred and they are not obligated to complete the merger
KKR on Friday had success in attracting investors to a $5 billion loan used for its acquisition of First Data Corp. ) Initial reluctance by Wall Street caused the buyout shop to lower the amount of its borrowing – and come out with an initial $5 billion instead of an original plan to raise $14 billion
The credit crisis caused four of Wall Street’s top investment banks to report this week that it wrote-off some $4 billion of loans during the third quarter. In some cases, the banks weren’t able to find funding for the loans – or they plunged in value as investors retreated. »
There has also been a number of reports that major investment and retail banks have approached private-equity firms about calling deals off. The banks have offered to pay the break up fee to keep the large loans off their books. 
A much more difficult random walk through Wall street « calculus« .
Who will remember the Goldman Sachs CFO surprise and sadden declaration on the state of the mortgage derivative markets « An abrupt downfall of 24 standard deviation »?
Global Alpha fund (GS) is down 40 Pct within a year and Golman Sachs (courtesy of the mortgages loans derivatives) has posted stellar performances through their dealings on the short side of the mortgage loans derivatives (source Bloomberg)
Cured, but not saved
A random walk through Wall street Logic
Who will remember that In May June 2007, the equities markets were ebullient and finding their justification through the numerous acquisitions and merger which were taking place at the time?
Sources CNN
« KKR, Goldman pull out of $8B Harman buy
Private equity groups say a ‘material’ change in the audio equipment company’s business has occurred and they are not obligated to complete the merger
KKR on Friday had success in attracting investors to a $5 billion loan used for its acquisition of First Data Corp. ) Initial reluctance by Wall Street caused the buyout shop to lower the amount of its borrowing – and come out with an initial $5 billion instead of an original plan to raise $14 billion
The credit crisis caused four of Wall Street’s top investment banks to report this week that it wrote-off some $4 billion of loans during the third quarter. In some cases, the banks weren’t able to find funding for the loans – or they plunged in value as investors retreated. »
There has also been a number of reports that major investment and retail banks have approached private-equity firms about calling deals off. The banks have offered to pay the break up fee to keep the large loans off their books. 
A much more difficult random walk through Wall street « calculus« .
Who will remember the Goldman Sachs CFO surprise and sadden declaration on the state of the mortgage derivative markets « An abrupt downfall of 24 standard deviation »?
Global Alpha fund (GS) is down 40 Pct within a year and Golman Sachs (courtesy of the mortgages loans derivatives) has posted stellar performances through their dealings on the short side of the mortgage loans derivatives (source Bloomberg)
PS In case it could help “the material adverse change clause”
Goldman Says Buy Puts as Hedge Against U.S. Slowdown (Update1)
By Jeff Kearns
Sept. 13 (Bloomberg) — Investors should buy put options on exchange-traded funds tracking the industrial, raw-material and technology industries as protection from the slowing U.S. economy, strategists at Goldman, Sachs & Co. said.
As someone who has spent two weeks in a psych ward, I assure you most crazy people are far, far saner than market traders.
Eclectic – I too felt that way about Mr. Mauldin – look at all the children he has adopted! Shortly after the 2004 election he mentioned Karl Rove’s “magic”. Still mired in depression from the results of the election, I wrote him and expressed my disappointment that he would speak favorably of such a man. I mentioned the story of an Alabama judge by the name of Kennedy http://www.theatlantic.com/doc/200411/green/3.
I never heard back – but he did acknowledge in the next letter that he didn’t always approve of Rove’s tactics. I imagine I wasn’t the only one to write to him.
I lost interest in him after that – I still get his e-mails, but rarely read them (I know I should). I don’t know if he’s turned on the Bush Administration.
Anyway – I just thought I would mention that.
gr8,
I realize politics are an inevitable element of this blog, but, other than respecting your opinion, I don’t care what Mr. Mauldin’s politics are. I couldn’t care less about what he thinks of Rove.