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Logical Thought
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My name is Mark B. Spiegel and I'm the Managing Member of Stanphyl Capital Management LLC. I can be reached at: mark (at) stanphylcap (dot) com. My Twitter feed is @markbspiegel
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I don't have a blog, but here's a link to a WSJ article regarding my thoughts on the "flash crash"
  • Albert Einstein once said... 5 comments
    May 10, 2010 1:46 PM

    "The definition of insanity is doing the same thing over and over again and expecting different results."

    Well, seeing as the ECB is pretty much doing everything Bernanke and Geithner did last year, which wound up massively tanking the dollar...

    Why should anyone think the Euro will now go anywhere but DOWN?

    The next target is around 1.24.

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  • Jeff Miller
    , contributor
    Comments (2124) | Send Message
     
    This is a rather facile leap to cause and effect. What do you think would have happened to the dollar if official public policy had allowed the economy to collapse?

     

    If you are going to make these assertions, you need to have a disciplined, thoughtful counter-factual. It requires evidence about what would have happened.

     

    It is not enough to sit in the bleacher seats and criticize.

     

    Just a thought ...
    10 May 2010, 09:57 PM Reply Like
  • Logical Thought
    , contributor
    Comments (5485) | Send Message
     
    Author’s reply » >>What do you think would have happened to the dollar if official public policy had allowed the economy to collapse?<<

     

    Jeff, thanks for commenting.

     

    I actually think that the "official public policy" that was chosen will-- in the long run-- make the economy much worse. I think that instead of those bank bailouts structured the way they were, they all should have immediately been put into receivership, thereby wiping out the common stock shareholders and giving a huge haircut to the debtholders, but allowing a "clean start" going forward. Instead, we have simply transferred a ton of bad debt onto the backs of the American taxpayer, and are still left with banks that are forced to play "extend and pretend", thereby greatly reducing the number of new loans they can make. The combination of these two factors will mean YEARS of below-par growth

     

    As far as what Europe should have done, it seems pretty simple to me: the fiscally responsible countries should have tossed the other ones out of the EU (or, at least, out of the Euro). After some initial volatility, the Euro would've wound up considerably HIGHER.
    11 May 2010, 07:07 AM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    Prior to the bankers and their government instituting the mega- bank bailout and ensconcing Too Big to Fail, 100 cents on the dollar payout for every egregious risk-gone-wrong, there were other reasonable possibilities that would have resulted in a supportive solution with perhaps some more temporary discomfort, but with far less moral hazard and forward sovereign risk.

     

    A thoughtful counter-factual would not assume that "an official public policy to allow the economy to collapse" was the only alternate path. I find that to be a facile leap indeed.
    11 May 2010, 07:25 AM Reply Like
  • Jeff Miller
    , contributor
    Comments (2124) | Send Message
     
    logicalthought -- You have described your counter-factual. Let's accept that, at least as the first effect.

     

    Under these circumstances, what do you think would have happened to the dollar? You say it "tanked" under current policy. Why do you think it would have been stronger under your proposed approach?

     

    (I'm sticking to the US for now, but we can circle back to Europe later if you are interested).
    11 May 2010, 11:34 AM Reply Like
  • Logical Thought
    , contributor
    Comments (5485) | Send Message
     
    Author’s reply » >>... what do you think would have happened to the dollar? You say it "tanked" under current policy. Why do you think it would have been stronger under your proposed approach?<<

     

    I think that the dollar tanked out of fear that the Fed would need to print a lot of them in order to finance those bailouts. If the Fed had instead placed those costs upon the debt and equity holders of the (essentially bankrupt) institutions, the dollar would have performed much better, simply because the market's perception would have been that there wouldn't be as many of them in existence.
    11 May 2010, 11:40 AM Reply Like
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