Poor Dude

Another Big Bank Failure: More Likely Than Not to Occur

Reggie, methinks you have ticked off the naysayers by speaking the obvious truth. Let them not dissuade you.


Like them, I had unlimited faith in my country and my government and it's ability to protect our "way of life". So I bet heavily on Lehman Brothers when it became far too cheap. And now I sit here, holding nothing.


And then I bet heavily on Wahington Mutual, when it became far too cheap. Our nation's largest Savings and Loan. A company which had been around for more than 100 years, and had survived the Great Depression. And today, I sit here with nothing.


I started buying our nation's largest bank (Citigroup), when it had lost half its value in only 6 months. And today, I sit here with an investment worth only 15 percent of what I paid for it. And that's AFTER a massive government intervention to stop it from going the way of Lehman Brothers et al. For now.


And being a student of "macro" affairs, I can't help but realize that the actions our government is taking today --- to prop up a failed economic model based upon relentless expansion and endless credit --- are doing nothing more than inflating the largest economic bubble of all time. Teaser mortgages pale by comparison. When the bubble of "obligations of the US Government" pops, you won't want to be anywhere near anything which is related to prior values in the global financial markets --- unless you are now buying it at 5 to 10 cents on last year's dollar (or less).


And I'd recommend that everyone put at least 25 percent of their portfolio into gold and silver and other "non-national" assets, just in case you and I are right and they are wrong. The way I view it, it is cheap short-term insurance. It'll be easy enough to scale back out of the position, if our worst fears don't come true and everyone ultimately gets a good laugh on us.


But buying Treasuries as a "safe haven"??? That's downright funny. The world's largest economy has doubled its debt (leverage) in only the last 8 years. And then doubled it yet again, within only the last 12 months. Four years from now, the US will owe all of its future economic productivity for at least the next 25 years to repay what it has borrowed in only the last 10. You want to invest in "that" ????


No thanks. I'd much rather finance the mortgage for a subprime borrower with no documentation. That way, at least, I'd have something like a 35 to 40 percent chance of being repaid!