Kass: Mad As Hell

This blog post originally appeared on RealMoney Silver on Sept. 25 at 8:29 a.m. EDT.

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I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's worth, banks are going bust, shopkeepers keep a gun under the counter, punks are running wild in the street, and there's nobody anywhere who seems to know what to do. And there's no end to it. We know the air is unfit to breathe and our food is unfit to eat. And we sit watching our TVs while some local newscaster tells us that today we had 15 homicides and 63 violent crimes, as if that's the way it's supposed to be!

We all know things are bad -- worse than bad -- they're crazy.

-- Howard Beale (Peter Finch), Network

As a dedicated short seller, it is not surprising that I have come to the defense of the practice.

I talk my book no differently (but hopefully more objectively) than many permabulls did over the last two years when they ignored an historic Black Swan event in credit that created a distortion and disconnect between debt and equity prices, a phenomenon that still exists today in the TED spread, which has gone over 3.00 for only the third time in history -- the other two times were during the market crash of October 1987 and on last Thursday -- and an all-time high in the two-year U.S. swap spreads (the two-year U.S. note vs. Libor).

A month ago, I wrote an op-ed column in the Financial Times that spelled out my view that short sellers shouldn't be restricted in their activity and shouldn't be blamed for the abuses in lending, credit formation and in the growth of the unregulated derivative markets that got us into the mess that we are in today. Rather, investors and regulators should have listened to short sellers' economic forebodings.

Last Thursday's "Blame the Blamers" again suggested that critics of short sellers were focusing on the wrong group and that those pointing their fingers are in denial and need to take a hard look at themselves in the mirror.

On Monday, in "Wall Street Has Sold Out America," I characterized Wall Street and its managements as some of the true culprits and unscrupulous players in the current credit morass.