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WALL STREET THANKSGIVING
As Americans this week sat down to their
traditional Thanksgiving dinner, the real feast was once again being
enjoyed by the Wall Street elite. Citigroup received a heaping helping
of government aid from the world's two most famous turkeys – Bailout Ben
Bernanke and Handout Hank Paulson.
The US government is now guaranteeing over $300
billion worth of Citi's loans. It is obvious what will happen next on
the road to Bailoutville, USA. Next will be a literal stampede of all
the other American financial turkeys looking for a similarly juicy deal
from Uncle Sam. By the way, do turkeys stampede like cattle or do they
simply go into full panic mode?
Every other bank from Bank of America on down will
be racing toward the government trough, like the greedy animals that
they are, looking for Uncle Sam to guarantee all of their “turkey”
loans. Although instead of oinks, we will hear “me too”! Let us not
forget also all of those companies, such as Goldman Sachs and American
Express, that have turned themselves into “banks” so they can also feed
at the government trough.
The cost of the bailout of the American financial
system is already approaching $8 trillion. I would not be surprised to
see that number climb easily tenfold. Which brings me back to the
subject I have discussed in previous articles - the US Treasury market.
Right now the US Treasury market is sucking up all
of the remaining American capital the way a fire sucks up all of the
surrounding oxygen. Such fires always leave behind them nothing but
charred ruins and destruction of all life in the area for many years to
come. That is what will happen here. First, crowd in all the remaining
American capital into the US bond market and then burn it up.
That capital will catch fire and burn in 2009 as
Wall Street comes to the stark realization that the key foreign capital
that is needed to fund the ongoing trillion dollar plus US deficits will
remain in their home countries taking care of their own economic
problems and not bailing out the US.
It's simple human nature. If there were a fire and
you could save either only your own family or your neighbor, whom would
you save? Obviously 99.99% of people would save their own family first.
Wall Street is making foolish huge bets otherwise.
BOB the TURKEY
Speaking of burning up, I ran across an item in the
Financial Times that just burned me up and reinforced my distaste for
the turkeys on Wall Street. In a “View from the Top” profile, the
Financial Times spoke to Robert Greenhill. Mr. Greenhill is the chairman
of the independent investment bank, Greenhill & Co. Inc.
Mr. Greenhill claims to strongly disagree with
President-Elect Barack Obama's more interventionist economic policies.
Yet in the same breath, he calls for massive government intervention and
for the Federal Reserve to buy distressed mortgages directly. What a
hypocrite!
When asked directly what concerns him most
about greater government involvement in the economy, Mr. Greenhill
stated that the most “dangerous” thing would be the government
regulating “executive compensation and bonus pools”. The greed and sense
of entitlement that exudes from Mr. Greenhill is so typical of Wall
Street turkeys and should enrage every American!
Americans and Tryptophan
Sadly, many Americans don't seem to be outraged by
what is happening in Wall Street and Washington. Americans should be
outraged that they, their children, and their grandchildren have been
shackled with the bonds of trillions of dollars of debt which will take
decades to pay off, if ever.
Yet when I speak to people about it or write an
article about the situation, I get virtually no response, no sense of
outrage. I also get the same reaction when I speak about America's
current move away from capitalism and towards increased control of the
economy by the US government. People just simply shrug their shoulders.
It's as if most Americans are in a constant
tryptophan-induced state of sleepiness. Most Americans act as if they
eat a large turkey dinner each and every day of their lives.
Apparently that is what is happening. There was
recently a very interesting report from the ISI or Intercollegiate
Studies Institute. For this report, the Institute gave a 33 question
quiz to 2500 average Americans including college students and elected
officials on basic civics.
Of the 2500 participants, nearly 1800 failed. The
average score was 49. It is interesting to note that the elected
officials in the study had an even lower average score – 44. And only
27 percent of elected office holders in the study could identify a right
or freedom guaranteed by the First Amendment! I'm actually surprised
that 27 percent could.
Here's another item from the study that was no
surprise – twice as many people knew that Paula Abdul was a judge on
American Idol than knew that the words “government of the people, by the
people, for the people” came from Lincoln's Gettysburg Address.
Since my emphasis is on investing and economics,
here is the clincher for me. Only 17 percent of college graduates
understood the difference between free markets and centralized planning!
Are they teaching anything in American schools nowadays besides how to
party hearty and to always feel good about yourself?
At least now I understand why I am getting so
little reaction to my rants about how the American economic system is
going down the drain. Apparently most people don't know the difference
between freedom and a governmental nanny state.
If you do, please feel free to drop me a line at Oxbury Publishing. Or go back to eating turkey leftovers and enjoy a nice tryptophan-induced nap.
Tony D'Altorio
Oxbury Publishing
Analyst,
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