The laundry list of announcements over the past week are offering a life line to holders of financial instruments globally, especially it appears, the ones last night: no more short selling of financial stocks, an RTC type solution to bad assets, and a special fund to support money market funds. Honestly, I have mixed feelings to all this. I am thankful that the markets are not in a free fall, but at what long term cost? Short term thinking is what got us in trouble in the first place. Let’s do what keeps us ‘happy’ at the expense of what makes us good. Maximize profits in the short term rather than build businesses on fundamental good models that provide real and realistic products and services to the general public. Capital markets are no longer free flowing but manipulated by non-market forces.
How do you play by the rules when the rules keep changing? The US is the largest and at one time most respected financial system of the world and now? Granted hedge funds got too big and maybe too powerful, but they did some good as well, and this latest move I am sure caused problems that we cannot imagine. Yes rich people invest in hedge funds, but so do endowments and pension funds. And what about Lehman and Merrill? If the government did this earlier I think they would still be standing. Morgan? Goldman? How many people, people, not just rich people, dumped their stock yesterday in order to protect their savings. Seeing the move today I am sure some are never going to touch a stock again.
This is not a free market any more. The government is telling the world we will do whatever we want, whenever we want, to do what we perceive is in the best interest of the ‘public’ good.
At the end of the day it will be the lawyers that make all the money. The litigation around what is going on right now will last my lifetime.
No more financial news today…..I am going to drive my daughter to school and take a hip hop class. I could never have imagined what has been going on these past few weeks. Never.
for details on the Paulson Plan – here it is