Monday Morning Quarterback: Back in the U.S.S.A.!-Minyanville

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Monday Morning Quarterback: Back in the U.S.S.A.!

Todd Harrison Sep 22, 2008 8:00 am

Monday Morning Quarterback: Back in the U.S.S.A.!


		The government has changed the face of the financial world.

“You say you want a revolution, well you know. We all want to change the world.”
--The Beatles

No, you weren’t dreaming. The construct of capitalism forever shifted Friday when short sales of the financials were banned and the government declared martial law.

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It was an historic moment that changed the face of free markets and altered the structural integrity of the system.

To be certain, there was—and is—genuine crisis and to fully appreciate the severity of the situation, we must understand how we got here.

That educational process isn’t a sound bite or quick conversation.

It is precisely why we started Minyanville.

To educate and enlighten, to provoke rather than shape thought.

Minyanville's Why Wall Street Will Never Be the Same

Minyanville's Why Wall Street Will Never Be the Same

With that mission in mind, I would encourage folks to read through the many links nestled in last week’s column, The Upside of Anger.

It will provide the necessary context for future discussions as we wade our way through these tenuous times.

Wall Street has infected Main Street with its problems.

It’s imperative that Main Street understand the root causes of the problem so we can collectively navigate it.

Clarity Now

We’ve been offering that the credit crisis must resolve itself in one of two ways as the debt issuance mounted on the September horizon.

The first is credit cancer that is chewing through various industries. This will phase through homebuilders, banks, “financials in drag” (such as General Electric (GE), General Motors (GM) and Ford (F)), technology, retail, credit card companies and commodities until the body is rid of disease.

The other is an outright car crash; a collision where credit seizes, capital markets freeze, price discovery permeates and social mood shifts as we come to terms with the new world order.

The government is attempting to buy the cancer and sell the car crash through the massive bailout and banned short sales in the financials. There has been much debate over their actions but it is what it is and we’ll do what we must.

The simple yet scary truth is that if the government continued to administer ad hoc drugs to mask the disease, the stock market would have experienced a cataclysmic crash and that’s not something that benefits anyone.

As a financially conservative social liberal, I’m a proponent of free markets.

I’ve long written that time and price are the only true solutions for what ails us and we need to go through this to get through this.

Given the derivative machination tying together the global economy—upwards of $500 trillion notional—allowing the market to take that medicine would have been akin to unleashing dominoes laced with dynamite.

It would have destroyed the capital market structure of our finance-based economy. The cumulative imbalances have been building since the turn of the century and have grown in magnitude and consequence.

I don’t profess to have the “right answer” as I’m not sure one exists. As this process of price discovery permeates, we’ll need to see all sides and allow for them all.

Capital preservation, debt reduction and financial intelligence are independent of directional views. They are the construct of financial survival as we fight our way through this war.

“You weep for Santiago and curse the Marines; you have that luxury. You have the luxury of not knowing what I know: that Santiago's death, while tragic, probably saved lives and that my existence, while grotesque and incomprehensible to you, saves lives.”
--Col. Nathan R. Jessep, A Few Good Men

As I synthesized these historic times, my sadness shifted to an insatiable desire to identify solutions. To do that, we must first understand the nature of the beast.

It’s a moot point to debate the fragility of the system or the financial fabric that comprises it. There is plenty of blame to go around and that extends to the financial firms that repackaged risk and created this monster in the first place.

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Comments (29)

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Davd Leffingwell

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09-22-2008, 4:54 pm
This latest market violence is not a direct result of terrorism, but an indirect result of 9/11. Here's my reasoning... After 9/11, the American psyche was greatly affected. Realizing our human frailty, we focused on tangible thing Read More

Sek Smith

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09-22-2008, 8:29 pm
Dan, I am very much in tune with your thoughts. But in this dark hour for introspection, I would try to look even further to human nature as the real flaw in the system. Why, the very way we measure progress (as a function of greater ac Read More

Dan Conine

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09-22-2008, 9:42 pm
"the current bailout will add NO value to the spending power of the consumer and have no multiplier effect. " In fact, it will take away from the power to spend by increasing taxes or devaluing the dollar, most likely both, a Read More

J S

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09-22-2008, 10:16 pm
Excellent observation. Is this the only forum that understands eco 101? Perhaps Ben should check in here from time to time. As for'29, without regard for politics: It is a fact that accumulation of wealth at the very top slows down money veloc Read More

Brian Rauchfuss

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09-23-2008, 8:14 pm
I guess it was Dodd - for some reason I mix those two up: From Yahoo News: "Getting the action right is key, Dodd said: "There is no second act to this." He later spoke disparagingly of the administration's propos Read More


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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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