Eat my Shorts: Apologies to the Simpsons-how the Current Financial Crisis Came About

Return on Equity

I don’t know about you but I am really angry. I don’t know you, I don’t care about you, dear reader, I am a shareholder. You, you are a slave. You work in order to achieve a return on my equity. I thank you. Not.

You work from 8.30 to 5.30 every day to get me at least 12% or I will put my money elsewhere. Not.

Luckily the markets are efficient and overseen by grandees such as the SEC and the NYSE so the inefficient firms will go the wall. The wheat will be sorted from the chaff and the sheep separated from the goats. Unless we short your stock. So you work for 30 years of your life to pay your bills buy your house and support your family and then, well then someone was allowed and encouraged to destroy your savings and your pension.

Lies, Damned Lies and Statistics

Lie number one: People will restrain themselves

Tosh. Untrue, demonstrable garbage. So, faced with an easy way to borrow money in order to invest a sure fire winner, such as rising real estate prices, people will say, No, I will not overstretch myself. I know that there has to be a market correction sometime and when it happens I will suffer. Sure they will

Bankers and lenders watching their friends take home big bonuses based on the lending that they have been doing, unchecked uncaring, will say, “No we should be responsible. We will not enter this race. In the end there will be a market correction and many will suffer”. Yeah right. Easing credit restrictions and offering money to people expecting them not to take it is like…..is like… Nancy Reagan saying to an addict, JUST SAY NO!

So when it all goes wrong we just blame the people who borrowed the money. Right. Give a kid a sweet and say don’t eat that. Time it.

We blame the shareholders? They invested in the banks that were distributing the candy faster than the US marines in Paris, 1944. Nah. The poor saps, they believe the lies and anyway, most of us don’t even know we are shareholders; do you know where your pension is invested?

Lie number two: Markets are efficient

Think so? Check it out. Only the people that work in a market and then only a few of them have any idea of what is going on. Financial markets are not made up of individuals each reaching an informed decision based on transparent and reliable information Markets are made up of sheep.