If we apply this dynamic to the current credit crisis, we can draw some interesting conclusions: Let’s say that the infection is the mortgage crisis, which is affecting the creditworthiness of almost our entire financial system. The fever and symptoms are evident in the stock market performance of that sector, the sudden rise in default rates across all types of debt, the necessary liquidity injections provided by central banks worldwide, and so on. Furthermore, this infection is not localised in our tonsils, as one might expect, but rather the source of the infection is mysteriously and dangerously widespread, as we have already explained in Where is Wally?. We are therefore faced with a sepsis credit in every sense of the word. But that is not the end of our clinical picture: this infection has struck us right in the middle of weakened immune system or, as it is also known, the energy crisis, with oil at $100 a barrel and rising; the rise in Euribor makes us choking y distress, as well as a depression The local estate agent is really putting us off everything. From the jihad globalised We’d better not talk, just in case our hypochondria proves to be more well-founded (or fundamentalism).
Given a clinical picture such as the one we have described, and always with reference to the average investor or patient, the most appropriate and effective treatment is rest to conserve our limited energy, fever-reducing to bring the fever down and, of course, a course of treatment antibiotic which must be strictly followed if we are to recover without relapses or complications. In fact, I would say it is the only possible treatment.
The rest, even if it is not absolute, we would apply it to our investments in RV since we are not in the best position to deal with the stressful current market. Perhaps in a few days’ time, when the fever has broken and we’re feeling a bit better, it will be time to make a strong comeback with our flexible investments. But as things stand, we need to take it easy and stick to really good food. The scraps are only for those who scavengers with pedigree.
The fever-reducing, in their various forms, such as property sales, will help us to lower the temperature in our oversized mortgage boom. Investments in RF They will also help bring our stock market fever down. If we also maintain our income by collecting our sick pay on time, we’ll avoid chills and shivers. In short, these are remedies that won’t cure the global infection, but they will help us feel less ill.
And so we come to the what on the matter: The antibiotic. Is there any effective medication to cure sepsis caused by the US mortgage crisis? According to our modest knowledge of economics and healthcare, this ‘antibiotic’ is called balance sheet showing a loss. Investment banks and the banking sector in general began a few weeks ago (some even earlier) to publicly acknowledge massive losses arising from collateralised debt. In other words, the defaults in the securitisations that the financos were built on feet of clay, and the sorters irreverently blessed them. It is only through the quarterly publication of losses—recognised and recorded in the relevant balance sheets—that they can be assimilated, reconciled, accounted for, realised and, ultimately, to digest los billions dollars and euros lost in securitisations qualified hammered with several A’s.
This slow and painful process of acknowledging gaps and losses that come out of the closet for to take shape in financial statements, they are the antibiotic tablets that will slowly but effectively cure the sepsis credit which the global economic system is suffering. Some accompany the publication of this dire news with a shameful resignation or a pretentious termination devastating from the head of everyone capi of the company. Although I doubt that the shareholders and/or those affected by that disregard for risk (don’t miss out on What’s happening in the financial sector? from JMDV) offers them any comfort at all. Perhaps seeing the credit rating agencies hanging in the Plaza Mayor would be quite a bit more rewarding, but I'm afraid there's no way to make up for it.
We now have a clear diagnosis (something we didn’t have at the start of the summer) and have started taking the first pill of a antibiotic treatment which may span two financial years fully aware. With the first doses, we won’t feel any improvement in symptoms just yet; it may take some time for that to happen. However, the publication of results is beginning to eliminate bacteria and microbes, and this elimination will become more evident and potent once the respective financial periods of the affected entities have ended. It will be then that the seals and signatures of the auditing firms, living up to their name, will certify the veracity (sic) of those losses. Some organisations will not be able to withstand this public and accounting scrutiny. But the natural course of events will take its toll, and then the scavengers with pedigree which will be responsible for absorbing aseptically human and financial assets that have not passed the accounting test.
Our convalescence It will be a long process, but it seems clear that we will come through this. That said, we must see the process through to the end and iron out all the discrepancies in the audited financial statements. And that may not be possible until we have had the accounts audited for a couple of years, as once we have closed the current will continue collateral debts are exploding in the hands of the world’s most financially sound institutions. For now, stick to your medication, get plenty of rest and take care with the fever.
This is proving to be a real struggle, no doubt about it. Along the way, we’ll lose a good chunk of our physical and mental health, as well as money—lots of money. Damn natural selection… or maybe not.