This blog post originally appeared on RealMoney Silver on Oct. 6 at 8:26 a.m. EDT.
I simply must go.
Baby, it's cold outside.
The answer is no.
Ooh baby, it's cold outside.
This welcome has been.
I'm lucky that you dropped in.
So nice and warm.
Look out the window at that storm
My sister will be suspicious.
Man, your lips look so delicious.
My brother will be there at the door.
Waves upon a tropical shore.
My maiden aunt's mind is vicious.
Gosh, your lips look delicious.
Well maybe just a half a drink more.
Never such a blizzard before.
-- Frank Loesser, "Baby, It's Cold Outside"
Baby, it's bad out there, as disorder remains the order of the day.In searching for a song that embraces the winter of our investment discontent, the song, "Baby, It's Cold Outside" immediately came to my mind. It was originally introduced in the 1949 film Neptune's Daughter by Ricardo Montalban and Ester Williams, but its incarnations were as varied as they were splendid to listen to -- Margaret Whiting and Johnny Mercer, Ella Fitzgerald and Louis Jordan, Doris Day and Bing Crosby (my favorite!), Ray Charles and Betty Carter, Dinah Shore and Fred MacMurray, Rod Stewart and Dolly Parton and even Will Farrell. There are only a few parallels in stock market history that have resembled the stock market crash of 2008. The proximate causes are varied:
- an absence of regulatory supervision (and lending due diligence);
- gluttonous public and private sectors' accumulation of debt;
- the proliferation of un- or under-regulated financial weapons of mass destruction (of a derivative kind) in the emerging shadow banking industry;
- a worldwide credit contagion (which debunked the decoupling theory); and
- an asymmetric "heads I win, tails I win" Wall Street and hedge fund compensation structure.
Planet Krypton and the Stock Market Explode
Brainiac:The Edge, my trading diary available exclusively on RealMoney Silver, has documented the slow-motion economic and credit crash repeatedly for almost three years. Back in late 2007, I outlined my concerns regarding the emerging world credit problems, a levered consumer and a levered hedge fund community. Over the past two years, other naysayers (like myself), including Nouriel Roubini, David Tice, Bill Fleckenstein and Jim Chanos (among others), were vilified as Cassandras by most -- despite our documented (and substantive) warnings of impending doom (of a housing and credit kind). Like Jor-El's (Superman's scientist father) forebodings regarding the horrific fate of his beloved Planet Krypton, many market participants responded with a "see no evil, hear no evil" strategy/attitude. They remained ensconced on Planet Krypton, staying long stocks and concentrated in the crowded space of market leaders (mostly of a materials and energy kind), while Jor-El launched (and saved) his son Kal-El in a rocketship to Planet Earth and the short sellers stayed their course.
on Krypton's imminent destructionIf the council knew the truth, they would put me to work on an evacuation plan, a meaningless effort given the time remaining. Jor-El: How long? Brainiac: Hours ... this world has seen its last sunrise. -- Superman