The Central Threat

I’ve traded stocks since the early 90s. I missed ‘87, but survived the Internet Bubble, the Homebuilding Bubble, the Crude Bubble and Long Term Capital Management. I’m not Methuselah, and don’t claim to have the wisdom of Solomon. But I’m still here.

Let me tell you how this crisis is the same as what came before, how it's different, and a modest idea for how to solve the current meltdown.


The Familiar Themes

There are many smart people who saw this coming. We all have our stories of having never made a dime, despite both dire outlooks and efforts to capitalize spending cash and time playing the short side of the various names imploding over the last few weeks.

Minyanville has been labeled a group of perma-bears for as long as I’ve been part of it, largely because the folks here have forecast this exact type of crisis. Now it's arrived, and is picking up steam. It’s curious, but a central frustration running through many of us is:

a) There isn’t any satisfaction in being right for when no one listened to your warnings, which would have averted the crisis; and

b) the same agencies and offices who enabled this problem to grow unchecked are now being relied upon to come up with the solution.

Those who see train wrecks coming tend to be a bit removed from the panic when it finally happens. We all suffer the collateral damage, but if you knew the risks and kept your discipline, you controlled your downside to a reasonable degree. At the very least, if you knew a train wreck was coming, you probably had the good sense to get off the train.

It’s frightening to watch -- and I feel terrible for the folks losing their jobs -- but portfolio risk can be controlled.