Tuesday, March 16, 2010
Memo To Wall Street: Suck It!
If you watched 60 Minutes on Sunday, you probably saw the piece on author Michael Lewis and his latest book, "The Big Short."
Makes me want to go beat the living crap out of anybody who works at either Standard and Poor or Moody's. To me, those guys were the Tim Donaghy's of this whole thing. The referees of the game, who should have at least blown the whistle many years back on what was happening, to at least slow down the runaway train that was about to jacknife into flames. But first, let's take our own medicine.
There are plenty of "villains" to go around in the sub-prime housing crisis, that turned into the AIG meltdown, that prompted the massive government bailout, that will be paid by all of us for decades and decades.
And we can start by pointing the fingers at ourselves, the average consumer.
We too, were pigs at the trough.
We (and I don't mean literally all of us, just a collective "we") were the ones who took out home equity loans on inflated house values that were too good to be true. We bought larger and larger houses with exotic mortgages that would have been considered pure voodoo back in our father's day. We were the ones who thought we could be Donald Trump in our spare time, and flip condo after condo in Miami. We were the ones who signed papers without asking good questions, or considering the consequences. We were the ones who willfully lied about our income on applications.
So I'll be the first to admit that we are hardly innocents.
That said, I am not sure I ever want to purchase another stock, mutual fund, or other Wall Street investment instrument ever again. Not after the 60 Minutes piece.
I'd rather "invest" in catfish farms or rare stamps before I throw money at anything which includes a "prospectus."
Not that it matters, but for disclosure sake, I did not lose any substantial amount of money in the stock market because of this. And while my family and I moved during the dying days of the whole funny-mortgage mania of 2007, it was a move that was made for wholly different reasons, that still resulted in a nice little bit of real estate profit from the sale of our previous (and likely overvalued) house.
I also like to fancy myself an ardent fan of capitalism, and somebody who does not begrudge any millionaires (or billionaires) who are in my midst.
But like many Americans, it is hard to be convinced that what most of Wall Street does isn't just pure bullshit. A sort of "Casino Capitalism" in which "they" can never lose. Especially when the government rushes in to make AIG and Goldman Sachs whole when they should have all been left to walk home from Manhattan in barrels held up by suspenders. Yeah I blame Bush. And I blame Obama for hiring the same asshats who built the financial doomsday machine in the first place.
Oh yeah, I know. Letting those assclowns fail would have been more painful than the expensive taxpayer cure. I've heard that one. I'm not smart enough to know if its true. Still sounds like bullshit to me. Besides, maybe letting everybody's 401k bleed out to nearly nothing would have been the kind of wake up call this country needs. At least set the precedent to Wall Street: "You want to pay one guy $100 million a year, just because he sat on a pile of cash worth $10 billion, and turned it into $20 billion with indecipherable high-finance voodoo? Ooohhhhkay.... but you are on your own, if the whole thing comes up crap-sevens."
Back to the 60 Minutes piece. In there, Steve Kroft produces a singularly spectacular moment of interview journalism. While talking to the one-eyed Asperger Syndrome doctor who made $970 million by betting against all this insanity, Kroft led him into a question that left the good doc literally speechless.
When Kroft asked how the guy knew that these mortgage backed securities were becoming toxic junk, he said, innocently, "I started reading the prospectuses." When Kroft asked why that wasn't the job of places like Moody's and Standard and Poor's, the doc said "well, there was so much stuff being issued I don't see how they could keep track of it all."
Kroft: "But, you're just one guy....."
The doc just locked up, in silence. Kroft was right. This was once of the most amazing stories in modern capitalist history.
And Lewis focuses on the 12-20 investors who dared to bet the "Don't Pass" line at the Wall Street craps table back in the 2000's when it came to mortgage backed bonds. That's right, 12-20 people TOTAL! Versus millions of others, and every major institution that was stampeding the other way, right off the financial cliff.
Meanwhile, I know how many folks will email me to say: "You know, Czabe, 'buy and hold' is the best long term strategy. History has shown, that only solid, diversified investment in the market can safely outpace inflation."
Heard that one. I'm not so impressed anymore.
I feel like telling Wall Street: "Go play with your own money. I'm gonna build that catfish farm."