Pragmatus

The Coming Crash of 2008: A Result of Overleveraging

I think Matt makes very good points. I don't think it is possible however to nail a disaster timeline successfully, any more than it is possible to successfully "time the market". But there are deep problems not only in the derivatives market but in nuts-and-bolts investing as well. The business world is so divorced from reality that when any company has a pot of cash to spend, do they distribute it in the form of dividends, or invest it in R&D? No, they announce stock buy-back plans, one of the worse uses of cash imaginable. (The theory is that with fewer shares outstanding the price per share will be driven up, but this never has any long term positive effect--it is exactly like inflating a bicycle tire that has a hole in it. It works only for a while.)

This is the sort of insanity (along with silly schemes that squeeze another cent onto the earnings report merely for the sake of "beating the estimates", the company be damned) that has to be shaken out of business thinking before the current whipsaw, panicky markets can return to some semblance of usefulness for investors.