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Ken Kurson explains "Why I'm Happy the Stock Market Crashed"; Black Swan's author Taleb Up 50% This Year

November 06, 2008 – Comments (4)

FYI - I am still #1 in points with 10663. OOji the usurper, Bullish beliefs ran into a wall reality and a Bearish sell off. Points are tougher to obtain then accuracy, IMO. abitarePERFECT is holding in the  Top 20.

I am trying to share the wisdom of what I am reading and thinking, so Fools can adopt or dismiss or challenge my ideas. So here is what I like today: 

Robert Shiller: 'More tough times ahead for the US' 05 Nov 08

A political consultant explains how cheap cash and quick loans of the past exposed three myths for a better financial future.

Black Swan's author Taleb Up 50% This Year 

Why I'm Happy the Stock Market Crashed 

Read the entire article: 

http://www.esquire.com/features/green/why-im-happy-the-stock-market-crashed-1208 

Summary: 

Myth: Investment banks are an indispensable source of "innovation" and liquidity.

There are now no (major) investment banks. And no one will miss them. Like lawyers, these parasites basically create nothing, add no value. And now they don't exist. The global financial system will survive not giving tranches of ten thousand combined mortgages from the farthest-flung sections of America. And whoever invented these CDOs, these "collateralized debt obligations," should . . . find meaningful work.

Myth: Home ownership is an unalloyed good. 

It's not. Not just because it's expensive and illiquid, but because it's inappropriate for many kinds of people. And I don't mean just in a class-division way. (Although that's true, too, and Fannie and Freddie never should have been tasked with the social mission to "improve" the lots of poor people by saddling them with loans they couldn't repay.) I mean for economic reasons. Fifty percent is about the maximum number of households that should ever own homes in a society. A modern, efficient workforce needs its members to be mobile and nimble and not tethered to homes they barely own and cannot sell.

Myth: "Deregulation" caused this.

We're so, so, so not deregulated. The institutions that are failing are some of the most heavily regulated in the world. Investment banks are regulated by the SEC, the Federal Trade Commission, state attorneys general, and state banking commissions. But too many regulators are as bad as no regulators--none of them feels responsible since a failure can be blamed on all the others. Hedge funds are a great example. For years, people have been crying about the wild world of hedge funds. But hedge funds have actually held up well during this meltdown. Effective regulations are needed and possible. But any rush to clamp down willy-nilly will result in an even deeper freeze on liquidity and push this crisis deeper and longer.If you're an investment banker or a mortgage broker, yes, these will be prolonged and difficult times. You should consider coaching Little League. But the rest of us? On October 10, I bought GE stock for $18.77 and Altria for $16.58--wildly profitable companies with price-earnings ratios under 10 and yields of about 7 percent. There are great American companies paying out suddenly valuable American dollars as dividends. I just can't cry too hard when the stock market is holding the greatest sale of my lifetime. It's enough to make me want to write a bullish finance column.

Ken Kurson is a contributing editor at Esquire and executive vice-president of Jamestown Associates, a political-consulting firm in Washington, D. C.

Adult themes and  Language

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