This week of September 15, 2013, has set up to be one full of angst. We have a Fed Open Market Committee meeting Tuesday and Wednesday culminating with a pronouncement on the “Dreaded Taper.” Although the old saw about “September, The Cruelest Month,” seems to be heading for the same fate as “Sell in May and go away” (at least this year), another statistical anomaly may be being teed up showing October as an historically good month for severe market declines. Also we are beginning to hear an onslaught of rhetoric over the continuing resolution, debt ceiling and possible government shutdown. This is not to mention the fact that we are overbought and in need of a correction. Pass the Xanax, please!
Let me layer on that five years post-crash the media is taking us on a frightening trip down memory lane. The conclusion drawn by many is: not much has changed. “To big to fail” has not been addressed. The banks are still too leveraged. One article proclaimed that we could be headed for another debacle in the next five years.
Here are some examples (with hyperlinks) and a must watch interview clip with former MetLife, Chair and CEO, Robert Benmoshe. Benmoshe was tasked with leading AIG out of its problems. He accomplished this quite handily. All AIG TARP money has been repaid, plus $26 billion in profits were returned to taxpayers. His comments are a great insider’s retrospective on the crisis, and a balanced look at the current situation.
The September 14, issue of the New York Times featured an article “After The Financial Flood, The Pipes Are Still Broken.” The piece concludes that we have made scant progress to fix the system and we are still vulnerable.
Barron’s “Up and Down Wall Street” column points to the cover of this week’s TIME Magazine as a bad omen for the market. It features the famed Wall Street icon (a charging bull) wearing a party hat and sunglasses, whooping it up after the latest, great five-year run in the market. This would worry me if the accompanying article, “The Myth of Financial Reform,” were not so negative. The cover should have incorporated a matador, poised to thrust his banderillas into the bull.
Robert Benmoshe takes a more measured approach in his assessment of what happened five years ago. He was asked about his thoughts on the outcome if there had been no TARP and no bailouts. His answer is very telling and accurate (in my opinion) as were his comments about a future financial crisis vs. 2008. “The next crisis would be a bad bellyache, “ as opposed to a near-death experience.
You can count on future blow-ups. They are a fact of life…a virtual certainty in all financial markets. Eventually, bankers will figure out new ways to screw up a la 2008. Coupled with lax regulation and a disregard for history, the next time it could be worse. Let us hope it is a multi-generational phenomenon (as this type of seizure tends to be), like 1929 with mini blow-ups in the interim.
Regardless of what you see on the tube or read in the paper, the atmospherics surrounding the market’s big run since the 2009 lows bear absolutely no resemblance to any past market top that I have ever seen. “There is no joy in Mudville,” despite the massive asset value restoration in the housing and stock markets. The euphoria and bulls seem to be invisible. How I long for the days of those nightly news clips of ordinary people at their broker’s offices lauding the virtues of ‘stocks for the long-term’ (a daily feature of the 2000 top)? The fact is, many investors are still fearful and the media constantly churns that fear.
The media today and for the past five years has been the soul of skepticism. We may need a correction, but this does not look like a bubble, nor does it resemble a major top.
I say pass the Xanax, not because I’m anxious about the market. I just need it to help me cope with the media’s daily drivel and inanity. Better make it a double.
What do you think?
P.S. Thank you Lawrence Summers!
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