Freaky Friday Potpourri: Help Wanted in Washington!
By Todd Harrison Sep 05, 2008 10:24 am
Bill Gross has joined the march to the Treasury.
Remember all those discussions we had about the perils of moral hazard and the percolating sense of entitlement?
They're coming full circle as evidence mounts that all roads lead to deflation.
As I said Wednesday in Pirate's Booty, one of two scenarios will play out.
Either the credit cancer will phase through our economy, infecting sector after sector until debt is destroyed, or we'll witness a credit car crash if the September issuance can't be absorbed.
Neither of these scenarios is something one would wish for but if wishes were knishes, I would weigh 300 lbs.
Yesterday, one more man joined the Million Man March to the Treasury.
Not just any man, mind you, the man in the wonderful world of credit.
His name is Bill Gross and no, that's not a metaphor for the disgusting dollar.
Bill runs PIMCO, the world's largest bond fund and he's made a pretty penny through the years. He played the game and made a name for himself as the most powerful man in fixed income.
And yes, there was a time when that was a good thing.
Yesterday, Bill stepped on to the world stage when he said "If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury."
Gross continued on his firm's Web site. "[A] systematic debt liquidation is what confronts the U.S. and perhaps even the global financial system at the current time. Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami."
Pepe Depew covered this story with a stylistic approach that would make Hunter S. Thompson smile with pride. Credible analysis is a rarity these days, particularly when married with analogies of metaphorical junkies in a strung out system looking for a fix.
If you haven't read it yet, you're missing the last call for protocol as the bartender begins to flicker the lights.
When I first read Bill's statement, my immediate reaction was to ask "Why?"
I don't profess to know credit intricacies as well as Mr. Gross but I understand the nuances of human nature and complexities of capital markets.
If he's asking the government to further soil their already bloodied sheets, chances are that he no longer wants to sleep in the bed that he helped make.
There is a reason for everything but sometimes we must read between the lines.
If the Treasury is a buyer, it will be quite interesting to see if PIMCO is the counter-party. Imagine that.
Don't Hate the Player, Hate the Game
We've been following the changing State of the Art in the financial system for years, offering that fat needed to drip from a bone borne from greed and overcapacity.
That dynamic has come to bear as years of financial engineering unwinds and the grand experiment implodes.
We've also discussed the hedge fund bubble, which was akin to ten thousand traders standing in a circle shooting at each other.
That too has popped, as evidence by the recent closing of Ospraie Management, Andor Capital and a litany of other funds that opted to chase reward rather than manage risk.
This isn't an indictment of the system, it is a necessary consequence of it.
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