Thursday, January 19, 2012

Jumping the Shark !

      If you are of a certain age , you'll understand the expression. You may recall the episode on Happy Days where " The Fonz" jumps the shark - which over the years has become a part of the lexicon. In short when you jump the shark , you   break from your established norm and just fly off into Never Never Land , so to speak ! Maybe you have felt it - something hasn't felt right , there is a sense the morale compass has been misplaced. My first inkling of the shark being jumped probably came from following the events of the Iraq War ( number two ) , it wasn't so much that we basically invaded Iraq under completely false premises - the jump the shark moment came from the total lack of reaction from the average Joe and Jane to that fact that this had occurred !
     Apart from foreign policy , the idea of investing has jumped the shark as well ! The quaint concept of researching stocks , buying and holding them and benefitting from fundamental growth intrinsic to said companies has become transformed. Markets have become casinos - when the average length that a stock is held has dropped to 22 seconds due to high frequency trading and exotic algo trading program  , we aren't talking about jumping the shark..... we're talking about jumping up and down on that shark ! Investing has become gambling , the rules change during the game and the so called Regulators look the other way when the proverbial " fast one " gets pulled. Ponzi schemes galore , MF Global looting of customer accounts , reality show quality investment programs on mainstream television all lead to the general huckerism - yet once again , the average Joe and Jane snore away ,  not to be concerned.

    So , with this theme as a " jumping off " point ( pun intended ) , let's look at some items of the day !

Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments.
According to New York Times, the tactic has emerged in conversations with lawyers and hedge funds as it became clear that Greece was considering passing legislation to force all private bondholders to take losses, while exempting the European Central Bank, which is the largest institutional holder of Greek bonds with 50 billion euros or so. ( So says the NYT )
   Is this a jump the shark moment ? At first blush , the answer might seem yes - however , in Europe the approach legally is different than in the US. In that regard , investors may be able to argue that a change in the law by Greece wherein the terms of their bonds are changed ( so that the investors receive less than they are owed ) , actually could be viewed as a property right violation. the kicker being property rights in Europe are viewed as human rights ! Imagine the novel concept of property rights being viewed as human rights being applied in US Courts ! Imagine how investing might change if investors' property rights were treated as human rights - how refreshing might would it be ? Wouldn't that be a boost to the investor psyche if your hard earned funds were treated as human rights when a MF Global steals your allegedly protected accounts ? Wouldn't a Chrysler or GM bondholder have felt better about the system if their rights as bondholders weren't trampled by a manipulation of bankruptcy rules to satisfy  a government agenda ? Wouldn't the average investor feel more secure if he or she believed their face can't get ripped off with impunity - while Regulators looked the other way ? In sum , perhaps property rights should be viewed as an intrinsic human right to salvage investor confidence and vindicate the rule of law.  Let's consider another topic....

And Scene...Kodak Files For Chapter 11 Bankruptcy

   Th headlines tell the grim story - another American Icon bites the dust  , is forced to file bankruptcy and is reduced to monetizing its intellectual property. My question to ponder is why was manufacturing allowed to jump the shark - when did the policy makers decide it was a great move to allow the established norm of american manufacturing leading our global growth , to just wither away ? The death of manufacturing has led to the withering away of former great cities such as Flint and Detroit , has impacted state revenues and employment across the country and has shifted financial strength from the West to Asia . When may this be addressed seriously ? Will it take losing auto manufacturing entirely to China before the eyes of the politicians focus on the hollowing out of America ? When you go to work today , would anyone even comment or notice Kodak has died quietly ? Would it take the death of a Company such as Microsoft to cause the average Joe or Jane to say " There goes the Fonz over the Shark " !  One final item to ponder..... there's that IMF story from yesterday
The Washington-based lender is aiming to increase its resources after identifying a potential need for $1 trillion in financing in coming years, an IMF spokesman said in a statement. The IMF is studying options and will not comment further until it has consulted its members, the fund said. To incorporate a cash buffer, the lender is seeking a total $600 billion.
IMF Managing Director Christine Lagarde said yesterday her staff is looking at ways to expand the fund’s war-chest, which currently has about $385 billion available. While euro-region nations have already pledged to contribute 150 billion euros ($192 billion), the U.S. has said it has no plans to make new bilateral loans and leaders of Group of 20 nations ended last year at odds over the issue.

   If borrowing money to attempt to address a debt problem isn't jumping the proverbial shark , i don't know what is ! But we see the US wildly borrowing like mad , Europe borrowing like mad , the IMF borrowing like mad - just because it hasn't worked up to this point ,  is besides the point. But the incessant borrowing our way collectively into deeper debt has become a global norm - print faster , spend faster , go into debt faster. All things come to an end and the debt party will as well. At some point , folks will realize the shark has been jumped and we shall start on the path to returning to the norm. Pray that day comes before it's too late to salvage what we still have !