Sunday, September 14, 2008

Barclays Pulls Out of Lehman Talks AND AIG Needs to Raise $30-$40 BILLION

"Nothing to see here. Nothing to see here. Don't worry, the 'subprime crisis' is contained. Keep moving. Nothing to see here."

Honestly, the guys who were trying to sell us this pile of shit are either morons, totally removed, or liars. Given that the group includes Hammerin' Hank Paulson, Helicopter Ben Bernanke, Glorified Jamie Dimon, and Ken Dancing Fool Lewis, I'm going to have to guess that it's some combination of the latter two choices plus some willful self dilusion. If it is not clear to everyone that we are facing an epic financial crisis triggered by loose credit on assets at inflated prices in virtually every asset class, then it will never be clear.

In the past WEEK, we have seen Fannie and Freddie merged with the US Gov't (heretofore Treasie Mae and Feddie Mac), Lehman's effective failure, allegations that AIG needs to raise $30 to $40 billion in order to avoid a "severe credit downgrade", Merrill Lynch gathering some taint, and Washington Mutual approaching the edge. And the US stock market barely budged from last Friday's close to this past Friday. Down a smidge, but not much.

[See NY Times article on Lehman and AIG here]

At some point, people are going to realize that a persistently dwindling availability of credit and that credit which is available is only at more expensive prices (gov't subsidies not withstanding - GSEs) is extremely bad for asset prices of all kinds. When we begin a society where valuations are predicated on attractive returns to an all over primarily all equity buyer, we will have achieved a real bottom. Until then, I think we should remain a bit worried.

The coming week should be exciting.

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