Monday, March 17, 2008

$100 a Second---- IFCN Wk 15 -Mon- Equity: $623.66

The collapse of Bear Stearns sent the forex markets spinning on Friday, and carried on through today. Market players are very undecided which way to go - except sell anything they don't feel good about.

This morning, the dollar fell to a record low against the euro and a 12-year low vs. the yen. Gold went to an all new high, again.

Everyone who cares has heard about the “rescue” of Bear Stearns incident on Friday.

Bear Stearns stock has lost almost all of its market value. Sympathetic selling appeared in everything from soybeans to coffee and cocoa, including all the stock indexes

One of the most important principles on Wall Street is Baron Nathan Rothschild’s famous piece of advice: "Buy when the blood is in the streets".

We're there.

To hear how this or that firm has “lost” a billion or two-- or 20 (as is the case with Citigroup and Bear Stearns) is really an incredible thing. Especially when it is discovered that it is lost by the acts of one or two main people in a firm.

Many people have tried to personalize how much a billion is, since it is hard to get your mind around this huge amount for those of us in a normal world.

If you shredded a $100 bill every second, 24/7, for 3 years and 8 months you would have destroyed a billion dollars.

Citigroup's writedown last week of 18.1 billion dollars equals the same as a person shredding $1000 bills every second for more than 57 years. And virtually no consequences to the idiots who caused the problems. If this was your own money, it would be stupid but your own business. This money wasn't theirs.

Do you think an embezzler who took $50,000 from that same bank would stay out of prison?


The money is coming straight out of the stockholders pockets, most of whom had no idea what kind of risks they really faced by owning that stock. Nassim Taleb's concept of financial Black Swans is proven true again. They will always happen more often and to a greater degree than the public perception can handle.

There was some good news last week. According to the government on Friday, inflation is still in check. Right, we'll keep that in mind.

Joel Rensink

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