It’s Not Over

The financial crisis seems all but over.
Capital markets are confident again.
Stock markets rising.

It is as if Bear Stearns took the entire hit and everyone else just ducked the bullet.
This just ain’t so.
There are massive losses, massive losses yet to emerge.
This wave of confidence is like the guy falling off a skyscraper midway “all well so far”.

We would rather assign the current confidence surge to the MTV factor.
Instant Gratification, it it does not happen now, it will not happen.
Credit crisis…. boring… flip channel.
We have come to be so short sighted, demanding instant gratification that we are missing the bigger picture.

A financial turn of the tides, a massive deleveraging does not happen overnight.
It happens over time. Reporting cycle after reporting cycle.
Reality slowly setting in.
As we speak there are countless arguments with auditors on how to value assets.
This is a negative spiral, the argument is not about how much to write up, it’s about writing down.

The current confidence boom is from the fact that the world did not end in March/April, as the markets almost priced in. The world will not end. But we are in for hard times.
The players in the financial markets are exuberant from realizing that the world still stands. That can only mean one thing, happy sailing. Wow, lets start buying again, we could be missing the boat.

Most of the players still hold their jobs, credit lines are still valid, savings are still there, the bank has not foreclosured… yet. So from the looks of it, on the surface, everything is fine. Let’s buy.

The FED is using it’s precious reserve assets to back Wall Street up from the disaster of their excesses. As if the reserves where meant for Wall Street all along. One has to wonder, what will the FED would do if a REAL disaster hit? Another war, a major California Earthquake leveling San Francisco, a nuclear bomb in Manhattan?

The rut and the crisis will reemerge in due time, patience.

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