Marc's Mortgage Matter's

Where is the “smart money” going these days? If you believe that debt is being nationalized around the world, increasing its percentage of GDP’s to take it off the consumer’s back. That shifting the leverage to government balance sheets will be a drag on the world economy for years to come. That corporate earnings are heading down, since they no longer have the leverage available to them to increase their income. That forcing banks to lend money on assets that may depreciate just leads to outcomes like we are enduring now. That besides refinancing mortgages, most consumers would be better off reducing their debt, not increasing it, and will be better off spending less and saving more – and this will take years. If you believe all that, please let me know where to put my money, because I sure as heck don’t know.

Weekly Lesson:

In traditional capitalism, you have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

In American capitalism you have two cows. You sell one, and force the other to produce the milk of four cows. You are surprised when the cow drops dead.

In French capitalism you have two cows. You go on strike because you want three cows.

In Italian capitalism you have two cows, but you don’t know where they are. You break for lunch.

In Real capitalism you don’t have any cows. The bank will not lend you money to buy cows, because you don’t have any cows to put up as collateral.

In Enron Capitalism you have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. Sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet provided with the release.

The public buys your bull.

In Californian Capitalism you have two cows. They are happy.

In Arkansas capitalism you have two cows. That one on the left is kinda cute…