April Showers

When do we hear the good news? Is there any?

Oil closed above $100/barrel. In March, OPEC may resist calls for more production. Bush asked the Saudi’s to increase production in January, remember? But then Bush also said:

If they don’t have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do.

Well, Middle East SWF’s are certainly in a position to get bargain level prices for assets in trouble. Oil up; profits up.

Meanwhile, inflation creeps forward, hardly a real Fed worry at this point, what with the subprime mess unraveling in every direction possible. Jingle mail is the way to go.

Ten million home owners likely to walk from their homes.

We are talking about possibly one trillion dollars exiting the world economy.
Buffet, seeing an opportunity, has now entered the monoline business. Is this a philanthropic rescue or a great business move?

We thought the party would go on. A man’s gold was his home: All it could do was increase in value. Clever, arcane investment vehicles were tricks of the trade, all to increase profits, passing, not the buck, but the risk. Nothing was transparent. On December 3, 2007, Secretary Paulson said:

Mortgage market financial innovation has benefited the U.S. economy and U.S. homeowners; it has also introduced some of the challenges we face today. Financial innovation led to the creation of mortgage products that put homeownership within the reach of more people.

“Financial innovation.” Those words hang in the air like dewy gold, all wet with promise and excitement. (Yes, if you understand my metaphor, you got it right: A golden shower and all that that perversely implies.)

To be fair to Paulson, he did say we faced problems: Those risky, pesky mortgages. Yet, don’t worry:

And the U.S. economy remains fundamentally sound – core inflation is contained, continued job gains are providing a good foundation for household spending, corporate balance sheets remain healthy overall, and strong growth abroad is supporting U.S. exports. Our economy will continue to grow, but it is facing a number of challenges.

Let’s see, the last time we had a surplus trade balance was….in the 1970’s? But who’s worrying about the trade deficit when we have financial innovation to peddle?

Once, when talking about all this to my youngest son–now climbing the corporate ladder and certainly no dummy–, he told me not be such a doom and gloomer. The guys at the top know what they are doing. They are smart guys. Paulson got to be Secretary of the Treasury because he knows the score; he knows how to add and subtract. “You worry too much, dad. We may not understand it all, but they do. It’s their job.”

Something in me wants heads to roll. Bring forth the axe man. Let him whet his bone-crunching axe. Roll in the wagons, stuffed with our well-heeled leaders. Let them walk their last walk. As they kneel and place their heads on that last, hard pillow, let their own words be read so that history is clear.

The impoverished, angry crowd before them has gotten its own just deserts. Yes, it was greedy, too. It believed; but the scale of its crimes is petty compared to those at the top. “Caveat emptor,” it was warned. But who pitched the pitch? Who set the game in motion? How far up the ladder are they?

But I dream, of course. The people who engineered the mess will be trusted to engineer the solution. They will eventually retire, only to be brought back as wise, experienced counselors and be paid well for their counsel. I am sure Charlie Rose will, with much gravitas, talk the chummy talk; he on one side of the table; they on the other. We all will listen, hang in their every word.

Like Bill Clinton, Tony Blair, and Henry Kissinger, they will find lucrative employment lobbying.