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Five Things You Need to Know: Fed Paper Asks, What Have We Learned From the Crisis?


The answer? Liquidity crisis caused by a lack of liquidity.


3. Paulson Buys Stake in American Capital... No, the Other American Capital

It was an attractive thought, to be sure... that the newsiest hedge fund in the news, Paulson & Co., would be taking a 13% stake in American Capital (ACAS), the very same firm that took the other side of the synthetic CDO trade with Paulson at the center of the Securities and Exchange Commission suit against Goldman Sachs (GS)!

The only problem is it's not remotely true. Different American Capital. ACAS is a global asset manager. ACA Capital Management is unrelated to ACAS. Still, that didn't stop the information churn on Twitter from picking up on the name similarities with more than a few pundits marveling at the "impossible to believe" irony of it all. I love Twitter.

4. The New Non-Linear News Format

Newspapers are a form of linear storytelling. There is a crisply constructed uniform pattern to the content, which is why the rumored "death" of the newspaper is both startling and uncomfortable, especially for those of us who have grown up with newspapers and this form of storytelling.

That's why I've been thinking quite a bit about comments Google (GOOG) CEO Eric Schmidt made a couple of weeks ago to the Newspaper Association of America.

"I love newspapers. I love of reading them -- that when you're finished, you're done, and you know what's going on."

Indeed. Newspapers and the "news cycle" remain trapped in the linear world of manufacturing-based economies, time tables, clocks, and schedules. It's comforting to pick up the "news" and read it to completion. But this is not how we are increasingly experiencing the world. Further, I would argue that newspapers are but one small battleground of a larger war being fought over the very nature of experiential representation. Ultimately, I expect the non-linear to win at the expense of what we might now call "comfort media"; the newspaper, the televised newscast, almost all programmed "slots" for information and entertainment.

A release from that world will be (already is in fact) painful but ultimately bullish. Even now there are economic efficiencies and ideas that remain locked in a world of scheduled and pre-programmed activities that are like vestigial organs, adapted and evolved for an economy that no longer exists.

5. Everest Cleanup Mirrors Financial Markets

I love this story that was making the rounds yesterday, because in my view it sums up perfectly where we are from a Socionomics standpoint:

Team Sets Out to Clear Bodies from Everest's Death Zone

Sherpa expedition plans to climb some 8,000 metres to remove bodies of dead mountaineers and clear tonnes of rubbish.

What does this have to do with anything? Well, first, recall that Socionomics, based on the research of Robert Prechter, holds that social mood drives social action, not the other way around. To our customary way of thinking, we see a story like the above and think, "Wow, that is bizarre that scores of dead bodies on Everest have been there, frozen, some for decades." But step back and consider why this story is even "news" today? Why did a reporter suddenly come across this story? Why did an editor choose to run it? The casual answer is that, "it's interesting." But why? Why is it suddenly interesting?

Socionomics holds clues to unwrapping these questions. With the transition to negative social mood continues from peak positive, the Everest cleanup holds both a fascinating metaphorical and literal place alongside what has been happening in financial markets over the past 20 years.

For risk-seeking behavior, few places are more risky, and potentially rewarding, than Everest. So, as risk-seekers have treated the mountain as a playground for 20 years, a more reflective mood suddenly emphasizes the environmental impact on the mountain, as well as a deeper, more personal regard for the bodies that now "litter" it.

Similarly, financial markets, having been a playground for risk and excessive risk-seeking behavior for most of the same period are now being reevaluated with an emphasis on reflection and cleansing.

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