What I find surprising about the big shift in market sentiment the past few months is not that some players have resumed their Reckless Myopia— humans always come back to speculative madness eventually. But the surprising part this time is that it has resumed so quickly. Usually it takes at least a few years for market mania to resume; this time crazy has gone from zero to 60 in a few short months.
Another thing I have always found fascinating about market history is how universal human behaviour is through distant cycles and distant lands.
This next series of interviews with independent Chinese Economist Andy Xie draws these remarkable parallels between China and America and our present credit bust cycle and the Asian credit bust of 1998 as well as the Japanese banking crisis of the 90's and thereafter.
What I really like about Andy Xie is that he is a pragmatist. He has lived in America and is on the ground in China. He knows both countries and cultures well. He makes the real life, big picture points to help us understand the incredible economic links between China, America, our consumption habits and reckless behaviours.
Xie also makes some goods points about what the Obama administration has done wrong to date in handling the American credit crisis.
I keep hoping that Obama will snap out of his daze on these issues and see the need to fire his present financial advisors including Bernanke. (Maybe this is my bout of hopeless optimism.)
Maybe after he announces his Afghanistan plan tonight he can revisit a strategy for the financial stewardship war being lost right now at home.
Watch this clip from Dylan Ratigan on point:
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The current stock market momentum may well in part have its sustenance from the hundreds of billions, if not trillions, of dollars parked in cash-equivalents with very little, or even almost zero interest paid on that capital. I think that an increasing number of folks with capital parked in those poor-yielding havens of safety are worrying about missing out on the rising value of stocks whilst the coffers for return-on-capital remain woefully underperforming. John Hussman articulates the situation well in his Nov 30 piece, “Reckless Myopia,” an excerpt from which he says “I should have assumed that Wall Street's tendency toward reckless myopia – ingrained over the past decade – would return at the first sign of even temporary stability. The eagerness of investors to chase prevailing trends, and their unwillingness to concern themselves with predictable longer-term risks, drove a successive series of speculative advances and crashes during the past decade – the dot-com bubble, the tech bubble, the mortgage bubble, the private-equity bubble, and the commodities bubble. And here we are again.” His entire piece can be read at http://www.hussmanfunds.com/wmc/wmc091130.htm
Great leaders do what is necessary not because its popular but because its the right thing to do. President Obama is trying to be everything to everyone – he is a true politician but not a great leader.
Andy Xie pretty says there is no leadership in the US and based on what I have seen to date – I agree with him.