When things happen on the economic front that I don't have a clear grasp of, I seek out Robert J. Samuelson of the Washington Post and Newsweek. His column from last Wednesday (printed in Saturday's Rocky) spelled out in layman's terms what I needed to hear to tell me that my gut was right;
"Once assembled, these components created a manic machine for gambling. Traders and money managers had huge incentives to do whatever would increase short-term profits. Dubious mortgages were packaged into bonds, sold and traded. Investment houses had huge incentives to increase leverage. While the boom continued, government remained aloof."I have a retirement fund that is made up mostly of moderate-balanced mutual funds. It's generated a mild but steady return over several years. That is my only involvement with the stock market, and it will stay that way. I don't go to Vegas, Blackhawk, or Towaoc, and this episode reinforces my impression that there isn't much of a difference.
If you want some other entertaining and insightful reading about this with a local flavor, try our Ralph D'Andrea for a good overview of the proposed bailout as well as some red flags with it, or better yet check out the ever-reliable Sage of Salida, Ed Quillen. He came up with this gem:
"Boom and bust — it's a cycle we know well in Colorado, for as far back as it's possible to trace our economic history.
Granted, we can't go back all that far. For all we know, though, Spruce House at Mesa Verde was abandoned by people who couldn't keep up with their payments on subprime loans from Anasazi Savings & Loan, which had bundled the mortgages for Kokopelli Investment Group, which used them for security on a leveraged swap with Chaco Canyon Partners, which got overextended after shorting on turquoise futures."
In my limited observation of the coverage of all of this unfolding, I found the most entertaining fact this evening, while watching Manchester United tough out a 1-1 draw today with Premier League arch rival Chelsea.
Seems that Man U has as its' Principal Shirt Sponsor one of the major miscreants of this latest foray into legalized gambling with our money.
According to Wikipedia, AIG's contract with the club amounts to an annual obligation of £14.1 Million, or $25.7 Million, with 2 years of a 4-year deal remaining.
As 80% of AIG is slated to be controlled by the U.S. Government in fairly short order, you and I as taxpayers stand to be making a significant investment in English Football.
The Fox Soccer Channel announcer summed it up nicely after today's match:
"It would seem that Manchester United were a good deal more resilient today than their shirt sponsor".I would have liked to laugh, but I'm afraid it's a little too early for that. As a representative of the shirt sponsor, I'll take a 3XL with Wayne Rooney's number on the back.
Better yet, keep it. I'm an Arsenal fan.
Have a good week.