8.01.08
Another Government Failure
Why can’t they get it right? Regulators are supposed to perform oversight on the Banks, Wall Street firms, and Housing (Fannie May and Freddie Mac). Instead they make decisions that many times add to the problems that previous bad decisions created. The SEC several years ago did away with the “uptick rule”. In order to “short” a stock the previous trade had to be an uptick, a higher price than the previous trade. This of course led to short sellers being able to short a stock and hammer it into the ground as if it were a fence post. This resulted in a very high level of volatility in the market. Now they finally see the error in that decision and have gone back to the old rule.
If you look back in history you will see that almost every one ever appointed to be the head of one of the Agencies with oversight powers, has been a member of the “Good ‘Ol Boys Club”. They make most of the important decisions to be for the good of the other “members” of the club, not for the benefit of the general public. Last week they were again pumping more billions of dollars into the rescue of Freddie and Fannie.
Of course those were taxpayer’s dollars coming to the rescue. It is estimated that there are $5 trillion that are held in “off-books” by banks. A bill requiring banks to move these “assets” to “on the books” would be a death blow to many banks so they have agreed not to enforce it until 2010. By then they hope that things will have improved sufficiently to not cause another banking crises. Why have the regulators allowed this to happen in the first place? We are once again at one of those points in the cycle where the regulators having failed in their duties to regulate are now doing everything in their power to help rescue those whom they were supposed to be regulating.
The price of oil has been hurting both individuals and business alike. The Democrats are attempting to pass legislation to take speculators out of the FUTURES MARKET. The Senate however is against it. All that needs to be done is to raise the margin requirements from 5% to 50% like it is for stocks, and the problem would take care of itself. Many of the speculators would be unable to operate under those rules. The price of oil would drop like a rock and we would be well on the way to turning the economy around. The banking and brokerage industries seems to stumble into a new crisis every ten or fifteen years. Markets keep providing the lessons, but few if any learn from them.
With the problems we are now burdened with, it just make sense to be on the sidelines and wait for some things to occur to improve the outlook going forward. Our conservative money is still 100% in CASH.
We do have 50% invested in the short side of the market in our aggressive account.
Till next time
MTA Staff
