Randy Miller

Is Dubai's Default a Black Swan Event?

It's a black swan if the herd says it's a black swan. CNBC's ratings go up everytime there is some financial crisis, just like the weather channel's ratings go up every time there is a big storm. The difference is that the weather channel's coverage never made a storm bigger.

Watching CNBC's coverage today is fascinating. Every hour they are rehashing the same information over and over, just with different talking heads. If you give them too much credence, they will sew the seeds of panic, along with certain investors, blowing the story out of proportion. Given the choice between downplaying the story vs overplaying, they will always overplay, because that is where the ratings are, and they get more attention that way.

October 2008 Henry Paulsen, Avi, CNBC, and the other talking heads were all telling us to panic. Rarely the responsible thing to do.

Too Big to Fail Banks: A Simple Solution

Create a statute that says the US government shall not guarantee the existence of any firm.

The TBTF mentality of the last year has led to increased concentration of financial power, at exactly the time we should have been dispersing power. Why have the government hand Bear Stearns resources to Chase? Why hand Merrill Lynch to B of A? Why Not let other firms bid for those resources, so those resources might be allocated to the best team?

Require all financial institutions to be transparent to rating agencies.
Federal regulators should audit those agencies vigorously, and if there any clouding of the picture, enforce enforce extreme criminal penalties.

Let everybody know that everybody else can fail. So, if you depend on them, if you are interconnected with them, they can take you down with them. So protect yourself accordingly.

Does anybody really believe that AIG would be at $36 if they were not a government guaranteed firm?

Nationalization, By Any Other Name

It is not nationalization. An example of nationalization was Chile under Allende taking over the copper industry, including a lot of Anaconda Copper's assets, with the long term goal of running them as a government entity. Obama and Geithner need to make clear that their intention at most is to go in, clean up some of these bank holding companies, and get out. FDR closed all the banks, went in and examined all of them, and reopened the solvent banks fairly quickly.

We need to clean the speculators out of Wall Street, and let the good conservative bankers run the show. There are good people there, but if Wall Street cannot clean itself up, either the government needs to do it, or the financial center of America needs to be moved out of Wall Street. There is a trillion dollars in capital sitting on the sidelines, and that capital will not get loaned out or invested until the owners of that capital feel they are putting it in a safe place. It speaks volumes that they do not feel safe putting it on Wall Street.