Here goes the domino effect of the day and I wasn't planning on any widespread use of brain cells today either (THANKS LENN!)
I am old but not very old but the last decade seems to have brought out a new type of investor: the Speculator.
First we saw the Tech Bubble. That bubble began to burst in the early election cycle of the year 2000.
Shortly thereafter, energy traders began taking advantage of California's deregulation where wholesalers and traders would manipulate the western electric markets by taking power plants offline. What we ended up in the west with was a host of utility companies stuck in long term wholesale power contracts and credit ratings ruined.
We are still paying for it. 9/11 made the story go away from the national headlines but when anyone out west gets their summer electric bill, we sure as heck remember this scandal!
Shortly after 9/11 with credit loose, the packaged Mortgage Backed Security (read Lenn's story that prompted me to write) made its way into portfolios. Lenn writes:
"My vote for the largest contributor would be the investment banks on Wall Street. It was they who pooled the international funds, including Sovereign Wealth Funds, to buy the RMBSs, investment securities backed by residential mortgages. Alan Greenspan had rates so low, the billions of international money had no place to go. WAIT! Let's take some mortgages, carve them up, bundle them and resell them as Mortgage Backed Securities. Americans will always buy homes, won't they? Americans will always pay their mortgage payments won't they? All those Billions of Dollars from around the globe looking for a place to put those $Billions fed the frenzy of more and more sub-primes to originate, bundle, carve up, bundle again and sell again. Folks don't always understand just how much money went into these instruments. $900,000,000,000 is a hard number to wrap your head around."
Look at what I bolded in her statement. We know that many lives have been ruined because this statement has simply been proven false. I think the largest group of people <in my market> who have been hurt by this are people who don't have any control over making the mortgage payments: RENTERS.
I am trying not to go off on a tangent here but want people to think about the new SCANDAL DU JOUR: THE OIL BUBBLE.
Articles are written all over AR, all over the web about panic in regards to gasoline prices. Well I firmly believe we are in the midst of an oil bubble. (FYI, I believed that before that article came out, I have replied on many blog posts that there is no need to panic!) The price of a barrel of oil is not firmly based on supply or demand but on the futures market.
Does it hurt me to pay twice as much at the pump as I should? Sure! Will we have long lasting economic effects? YUP! It hurts that I have to pay twice as much as I should have to for a gallon of gas. Our thirst and lust for oil (read those bolded words again) are begging for more drilling, more this, more that. We don't see anything about conservation. We don't see anything about innovation. All we are seeing from this is that we are a vulnerable society to foreign & speculative money to snatch what we have from our economy.
What is up with that? It almost seems to be a collaborative effort. Our society is a "want it all want it now" greedy society. (Settle down, as a whole, OK?) Maybe if we learned how to save and learned how to conserve and learned how to be innovative we wouldn't get ourselves where we are today.
Dependant & Vulnerable.
:looking over the horizon for the next bubble:
good post.
Renee: I am SO tired of hearing how the oil prices are based on supply and demand--you are ENTIRELY correct that it IS based on futures. As for hitting the panic button--I HATE these prices but, I HAVE to fill up for my job and know full-well that we just need to be patient and wait for that perverbial bubble to BURST! GREAT post--I love how both you and Lenn simply tell it like it is!!
Renee.... it's sad, we are spoiled. We shouldn't need higher prices to learn how to save. My biggest issue is that, should we trust the gov't. Do we have other resources, but we don't want to spend the money. I know that we do say that we are dependant on others, but I don't think there is a lot of truth to that. Here is one thing.... why can't we be like the Europeans and make cars that travel 50 miles to the gallon. They do it... why can't we. I blame the automobile indursty partially for this. Just some food for thought...
Renee - I afree with you for the most part. However, I think something good will come from this. Automobile companies now belive that consumers will buy energy efficient cars. THat wasn't happening before, the best sellers were the least efficient of all vehicles. Something else that I believe is happening, is that I believe that the people who control oil are trying to influence the next election. It's the best chance they have ever had to get a person raised as a muslim into the oval office. Can it happen? Get people talking about change, and they make bad decisions.
I watch people everyday still slipping on those wide oil slicks...they really need to look first before blindly walking.
I really enjoyed reading this. So much truth and food for thought--- maybe even action!