The Simple Accountant

It May Be Time to Go Contrarian

@Mad Hedge:

To clarify a detail, Dave Rosenberg was chief economist at Merrill; Rich Bernstein was chief strategist. Their departures this spring have left B of A - MLS a much poorer firm, from a client perspective.

Roubini Attacks Bailout, But Misses Boat on Regulation

The market dislocations over the last 12 months have been in part a reaction to undisclosed or improperly stated risk, and the re-pricing that it requires. Certainly there are macroeconomic forces at play as well, but let us leave those aside for the purpose of this discussion. Orderly markets require a reasonably reliable way to measure present values, future cash flows, probabilities, and all the other fundamentals of finance.

Of course, that is not news to the learned readership here, but the point is this: Policy makers and regulators need not to lose sight of the fact that their role is to provide market participants with a reasonable assurance that their analytical tools will work properly, and then leave the market participants to conduct their business.

The Simple Accountant believes that the authorities have made an error, perhaps an understandable one but an error nonetheless, in putting public resources into the rescue of individual financial entities rather than systemic assurance of transparency, for example. Professor Roubini's call for more (should we say better?) regulation seems more agreeable than Mr. Shedlock's call for the complete absence of it, but the abhorrence of both gentlemen for "socialism" in the financial markets is well founded.