We have been very fortunate that the stock markets moved back and are re-liquifying the whole process, Greenspan said at an event in Edmonton, Alberta, presented by Abu Dhabi National Energy Co., the state-controlled energy producer known as Taqa.
If I print up $12 trillion in direct funds and guarantees - not based on production but rather based on intentionally overpaying for "assets" (that have a true character and value closer to that of used dog food) and then tell the primary dealers that I transact with that they are "too big to fail" and that I want them to buy risky assets (implying or outright stating that if they're wrong they won't be held responsible for the losses) of course I can drive the stock market higher.
For a while.
I certainly didn't.
But heh, that's me. I know, I know, The WSJ has their own data center claiming the P/E is "only" 69 and on "forward estimates" is 17. But their computational format is not published and is from a third party (Birinyi Associates), while Standard and Poors actually runs the S&P index. Who do you trust? I choose a firm that has nothing to sell and designed the index itself. You pick whoever you wish.
But left unsaid is how this "liquidity" gets into the broader economy. Oh sure, for the banks that are trading with your money, and a "can't lose" proposition, they make a nice chunk. Their employees get big bonuses, which they can then spend.
But this is a tiny fraction of the broader economy and population - not enough to matter.
Lending to ordinary people and businesses has not improved.
Now let me be clear: We are in this mess because we lent too much money to people who couldn't pay. That is, we "created" a false economic view, a false belief of sustainable economic activity (GDP) that in fact was simply compound pulling forward of demand. We did this by extracting equity everywhere we could find it, and then when that wasn't enough we allowed negative equity to not only develop but be pressed further! Indeed, the very premise of the "guidelines" published recently for FDIC bank examiners include allowing banks to count underwater commercial real estate loans as "perfectly fine" if they're cash-flowing - never mind the fact that the mortgage is for more than the property is worth, and thus if the cash-flow ceases for any reason (like, for instance, the tenants in the place going bankrupt or leaving for cheaper quarters!) the bank will suffer a huge capital loss.
But the idea that Greenscam is promoting - that "we're getting better on the back of asset appreciation in the stock market" - is nonsense. As any trader or investor that lived through last year will tell you, gains are not real until you reduce them to cash - "paper profits" are in fact no profit at all. Just ask those who had $1 million in their portfolios in October of 2007, yet even after the "huge rally" are still looking at a $700,000 balance!
Paper changes in balance sheets do not translate into spendable cash; at best they lead to another bubble just like home price "appreciation" did when people start borrowing against that so-called "value." This in turn leads to another collapse when the "value" disappears, just as it did with housing.
"Margin call Gentlemen" is not something you wish to hear, but it appears to be what Greenscam wants to see happen to millions of Americans.
Don't fall for this blatantly senile BS.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.