my take on recent events

Well, for those who can tolerate reading my views on the recent events, here's how I see it.

Ban hedge funds, ban fully-debt funded investing, and ban short-selling.

That's my answer to the world's problems...! ;)

Ahh - if only it were so simple.... (sigh)

But I can't help thinking that the whole financial "world" has got itself into this mess because they've become WAY too smartarsed and clever by half. They've invented derivatives, then derivatives of derivatives, and so on down the line. So now we have entire businesses doing nothing but shuffling around bits of paper (well, computer file equivalents) which are nothing but hot air, all of which are totally worthless, and the cycle goes round and round endlessly.

Bit like having multiple credit cards, each with 55 days interest free, and each 54th day paying of one with another, never having to repay the principle.

We have hedge funds borrowing paper money IOUs from other funds, and using them to buy companies or some types of derivatives. Then they employ rooms full of mathematical Ph.D coneheads and computer programmers and tell them to write programs to play one derivative off against another in such a way that they can just milk money out of the market. Most of the time it works - the bots do their bidding, and they make a motzah.

But then some junk mortgage worries come home to roost, and the 5 - 10% of actual long shares they hold get devalued by that same percentage, and these wheeler-dealer hedge fund smartypants suddenly become technically bankrupt. So they have to "unwind", de-leverage", call it what you like in finance-speak. It comes down to having to raise actual cash to settle all their bills which are like enormous margin calls.

So they sell their long shares, plus they try to double up their profits by short-selling as well. They push the markets down, and suck in all other players who start to panic. This is all fuelled by the very "knowledgeable" media pundits who predict all sorts of dire scenarios. The panic then really takes hold, and we see good value shares in strong, solid companies, being sold off in a desperation for peanuts and totally illogical, irrational prices. That's what happened yesterday and today.

Who knows what will happen on the Dow tonight? Who knows how the reserve banks will react - if they do at all? Who knows if the USA cares really, what happens in the rest of the world - do they actually know we exist?

I do however start to get a faint whiff of market-bottoming rubber-burning after today. I can't explain the feeling - but I'm less pessimistic tonight than I was last night, even after the 112-point fall today (forget about the 300 point intraday fall - it was still 112 down at the end of the day) Maybe I'm wrong, but perhaps - just MAYBE - we could have seen the bottom today.

Of course, those who are still desperate to get out of the market will take advantage of the slightest bounce to do so, causing all sorts of wobbly curved bounces on the way back up to sanity, but I suspect we'll get there. It could take 6 weeks or 6 years, but we'll get there.

Meanwhile, buying into solid companies who have been hit hard by selling that bears no relation to the company's true value or even their proper perceived value, should provide some excellent opportunities for smart investors, and even some traders.

At least - that's how I see it. As I said - ban hedge funds, ban fully debt-funded derivatives, and ban short-selling. None of this financial wheeling and dealing actually does a single thing for mankind (in the most non-sexist meaning of the word).

It produces nothing, it heals nothing, and it doesn't create anything of value. It just goes round and round and round and round and........