"John R. Carroll" wrote in message
...
Ed Huntress wrote:
"John R. Carroll" wrote in message
...
Ed Huntress wrote:
"John R. Carroll" wrote in message
...
Ed Huntress wrote:
"John R. Carroll" wrote in message
...
Ed Huntress wrote:
"Wes" wrote in message
...
"Ed Huntress" wrote:


Anyway, maybe, and I'm really curious to see what would happen if we
let all of the derivatives and hot air out of the balloon. It's like
standing on an ice flow in the Bering Sea and wondering what would
happen if it started to break into little pieces.

A better analogy would be human flight absent an airplane.
You think flapping the feathered contraption strapped to your arms will
have
you soaring like an eagle and it looks impressive.
In fact, you might even think you are really flying for a while after
jumping from a high enough perch. That's where we are today, point and
laugh
time.
The trouble comes when the realities of gravity and contact with Mother
Earth intrude. That's where we are headed. Gasp, cringe and turn.

Our financial system is just like that right now Ed.
What I haven't had anyone explain in terms of the underlying fundamentals
is
why Citi, AIG, BofA and all of our other publicly traded banks and
financial
institutions aren't trading where they ought to be - at ZERO.

Because investors are confident they'll be bailed out. That's part of what's
keeping interest rates low for large-corporation bonds and loans. Moral
hazard at work, helping to stimulate investment.


Even at the paltry sum of $3.50 per share, Citi is overvalued. They aren't
worth a thing.
AIG ought to be paying anyone stupid enough to want their common equity
and
the list just goes on and on.
Pretty funny. Go ahead, point and laugh.
That situation, not sovereign debt debacles, is about to end. It had to be
so and it will.
Gravity and Mother Earth are about to intrude and no amount of arm
flapping
will prevent it.
S.P.L.A.T.
The first gasp came in the form of a preemptively defensive $9 million
dollar bonus payment.

I suspect that Treasury and the Fed are trying to accomplish a gradual
unwinding and liquidation, without killing the host. The trick is to allow
things to collapse in smaller steps. That's what the bailouts are about.
Whether it will work is an open question. If it doesn't, we'll be right back
where we were in late 2008, which would have caused a complete collapse of
the worldwide credit system if they hadn't been bailed out.

Who knows? A lot of it is guesswork at this point. The people in charge of
financial operations in the US government are among the smartest and most
knowledgeable financial people in the world. Unfortunately, they see
everything through a banker's eyes.

--
Ed Huntress