“It’s a global crisis from the standpoint of too much debt and delevering,” said Gross, Pimco’s co-CEO. “Greece is just the focal point for the moment, but it’s a continuing process and that’s why you see gold down, that’s why you see oil down, that’s why you see stocks down, that’s why you see risk assets down, is because they’re delevering and money is basically fleeing to the center.”
Last week I sat down with Alasdair MacLeod of the GoldMoney Foundation’s Alasdair to discuss the current economic crisis, the financial sector and where the global economy may be heading.
“Park talks about government intervention in the economy and the impact this is having, and the growing public anger directed at governments and banks. The two have an in-depth discussion about the size of the derivatives market, and the affects this can have on the broader economy. They then discuss how the financial sector has evolved over the last 20 years, and how this compares with other historical periods. Both discuss the drastic expansion of the money supply since the Second World War and the inflationary consequences of this.
Park finishes by explaining why, despite the myriad economic problems confronting us today, she is optimistic about the future.
This podcast was recorded on May 16 2012 at the Hard Assets Investment Conference in New York.”
Facebook was the most over-hyped issue I have seen in the past 20 years. That’s saying something, because new issue pump and dumps are the norm. I have literally witnessed dozens of new issues pass by my desk over the years. Truly, this one was right up there as the gold standard of insanity. Predictably it was over-priced at issue. Predictably those who were suckered in have lost money. And as is human, most are traumatized and reacting badly to the loss.
The truth is that those who thought they were buying into a “hot” issue were not investing, they were speculating. Whether they understood this or not. They were taking sales puff from the distributors as “investment advice”. Most could not afford the risk, and are hurt now by the losses. Even if the stock eventually recovers value over coming months or years, most of the initial buyers will have long bailed with losses rather than waiting for the price to recover. There is another valuable learning opportunity in this story for everyone who is willing to see it.
This article really summarizes the story well. See Facebook IPO costs mom-and-pop investors a bundle, while Wall Street scored big.
I understand that many people are broke and desperate to make a quick buck to beef up their savings. Desperate people often do desperate things that end up only hurting them more. It is tragic but typical. What I don’t understand as easily is why so many intelligent, hard-working, educated, disciplined people, who have actually amassed sizable savings, still go to risk-sellers–banks, brokers, commissioned mutual fund sellers “financial planners” for their investment advice– staying in abusive relationships, even while they frequently leave one for another. Apparently many people still want to be repeatedly hit by a hammer. It is an amazing phenomenon to witness.
