Russ Winter's  Instablog

Lately, a slew of IPOs and secondary offerings have been brought to market  and many, if not most, have ended up as "busted deals" (trading below the offer price) (Dole Foods).   One reason being attributed to this is that private equity firms are using the window of inflated stock prices to try and unload some of their fleas. Another reason that I don't believe IPOs are well supported is because the stock market has once again been turned into a casino of futures and index trading. Investing in IPOs requires analytics and patient capital. I think both are lacking in this market. In fact, I really don't think individual stocks are even being rented much,  let alone owned.

• "Anyone who proposed giving government guarantees to retail depositors and other creditors, and then suggested that such funding could be used to finance highly risky and speculative activities, would be thought rather unworldly. But that is where we now are. It is important that banks in receipt of public support are not encouraged to try to earn their way out of that support by resuming the very activities that got them into trouble in the first place.” - Mervyn King, BOE Governor

What is so discouraging about the statement above, which is becoming more frequent I might add, is that nothing is being done to prevent it. The Train Wreck continues on. It is like standing by and watching a highly dangerous intersection near a city's biggest dive bar, waiting for the inevitable collision of the drunks, and hoping you don't miss it while going to the head.

Now comes blunt commentary from the watchdog charged with oversight of the Gumnut bailout programs.

• Despite the aspects of TARP that could reasonably be viewed as a substantial success," he wrote, "Treasury's actions in this regard have contributed to damage the credibility of the program and of the government itself, and the anger, cynicism and distrust created must be chalked up as one of the substantial, albeit unnecessary, costs of TARP."  Barofsky said public suspicion was fed by Treasury's decision not to require banks to report how they used their rescue money and its "less-than-accurate" statements describing the financial condition of nine large banks that benefited from large infusions of aid.

To me, the outcome is as plain as a Train Wreck. These financial institutions have formed large pools and have geared the market in a non-transparent way, knowing full well that zero interest rates would bring back, like Lazarus, other speculators and take these dice from cold dead hand types. The degree to which this has happened at this stage has frankly surprised and shocked me.   I have used "the silly season," but  Mervyn King's term  "unworldly" is perhaps more apt.   And the way the market has been re-geared is via a massive new burst of debt and leverage and attack against the USD (the "funding" currency).  Also unworldly is the concept that destroying the global purchasing power of the US Dollar holders will somehow create a sound economy. The truth is that the only real beneficiaries of this are speculators and dice throwers. It is a zero-sum game of transferring wealth from one group to another, and the Public knows this instinctively. They also know full well that they are on the outside of this "game," watching a Train Wreck.

The next stage will be the actual Train Wreck,  when these trades are once again unwound.  The too-big-to-fail banksters will once again go back to Washington with dynamite strapped to their bodies, and explain that they thought they were carrying out the wishes of Gumnut and Congress by attacking the Dollar and restoring fictitious capital to its full glory. The intellectual discussion around that one should be unworldy indeed.  Even more silly will be the attempt to bail out their follies once again with an emptied out and looted Treasury.