The Dow culture is being hanged by its own methods. People were told for years their investments were great. They were dazzled by unheard-of levels of complexity. They had to trust their advisors. The trust is gone, and the market has gone with it.
“Complexity” is now a synonym for “stupidity”. The only dazzling thing on the markets these days is the evidence of pure imbecility on a colossal scale.
Even with a carefully muted lickspittle “financial media”, (apparently those two words are a contradiction in terms) the gut level and grass roots investors have had enough.
"Lickspittle" refers to the total lack of pressure on any part of the financial sector by supposed experts. Everybody knew this was a train wreck in progress, and nobody bothered to tell the public. Nor is the market being exactly pilloried for making mistakes a work experience kid at the local bank would be chewed out for making.
Those who know the markets also know how cosy the relationships between media and finance market can be. Compared to those intimate dalliances, prostitution is a form of chastity.
Any questions about why financial news now has the credibility of a cardboard baby at a maternity hospital? Who the hell's going to believe anything coming from the "Everything's Fine" fan club?
The current market image of the US financial system is more commonly associated with poorly maintained public urinals.
This is a credibility gap of gigantic size, and the markets are really getting a thoroughly deserved comeuppance for their sheer lack of basic competence.
Investments based on nothing? Securities based on fraudulent transactions? “Investment vehicles” that somehow can’t even create an audit trail, if all this lack of specifics is to be believed, which it isn’t?
The joke, and it’s very black humor, is that for all the delusive number spinning, and hype about super executives, the real cash originally comes from much further down the food chain, Ma and Pa.
That supply has now dried up. The luxury of investment has gone from Middle America. Nor, obviously, is Middle America in any great hurry to get burned on a daily basis.
Particularly when the epic amounts of bull issuing from the market are getting progressively harder to believe, even as bull.
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Even admission of failure, as the edifice comes crashing down, seems to be too hard for these jellyfish. This is total systemic failure, and denial isn’t an option any more.
It’s also pretty hard to take seriously any possibility that the clowns responsible are suddenly going to turn into geniuses any time soon.
The Credibility Crash is likely to last for a generation of “experts”.
The New York Times brings the latest report from Happy Valley:
Customers pulled almost $11 billion out of all equity funds on Monday, about $7 billion from United States funds and $4 billion from global funds, according to Charles Biderman of TrimTabs, a research firm that tracks the funds.
TrimTabs estimates that, in the first 10 business days of this month, American funds have been hit with redemption demands totaling $13 billion, while global funds have handed back $12.6 billion, eclipsing a record set in January and reflecting the dismal performance of global funds in the last six weeks.
Still, these withdrawals represent tiny fractions of the overall assets in such funds, and are well below the monthly records set in July 2002. And Mr. Biderman says he believes a wave of panicky selling “is symptomatic of what occurs at market bottoms.”
Let’s hope Mr Biderman’s right, because the supply of hard capital is not looking good.
(For market people, “hard capital” is an ancient term referring to uncompromised liquidity usable for investment and buying food. They had a lot of it in the Pleistocene.)
With debts still unresolved, and no clear picture of the condition of the main investment market, one possibility is that the money that isn’t moving is money in funds which simply can’t move, or hasn’t moved yet. If so, the topsoil of the market has a lot of repositioning to do.
This is shrinkage in real terms, and the dreaded word “rationalization” is now the moving verb. Unfortunately the dead language of the old market (known as Euphemysticism) keeps showing up.
Current news is a good snapshot.
As Bloomberg (the only financial medium doing its job in the last 15 months) reports Morgan Stanley is now said to be looking at a merger with Wachovia Corp, mainly for reasons of survival, but you’d think that the office picnic was underway from some of the comments.
Fortunately Bloomberg is an expert interpreter, as this piece on the other large turkey on the market, Washington Mutual, shows.
As you can see, the phraseology is the same, the spin is the same, and nobody’s listening any more. They really have heard it all before.
The Credibility Crash is the beginning of the end of the Untouchable market culture. From now on, these jerks will be expected to work for a living.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com