The culture of fear: 24/7

No small contributor to this crisis: the culture of fear. It's not sex that sells. It's fear. Try it: watch tv for ten minutes and count the number of references to fear:—not just the menu du jour of fear of financial ruin, but fear of everything: crime, embarrassment, terrorists, being fat, being left out, fear of being uncool, of not getting laid, of getting old and falling in the bathtub, of getting old and not leaving a dime to your heirs, of just plain getting old. . . . Fear, fear, fear. With cable tv and the net it's Fear 24/7.

No wonder people get rattled before anything actually happens. No wonder the market drops when people just get a glimpse of that deer-in-the-headlights look in Henry Paulson's eyes. . . . 

Prisoner's dilemma

For a nice summary, in plain English, of the problem with turning around this economic crisis see Thomas Homer-Dixon's article in today's Globe and Mail. The essential problem is that what's in one's individual interest during an economic crisis—hoarding, saving, and not spending—feeds directly into our collective problem—falling demand, investment, and so forth. And that's why governments become the "spender of last resort," the only entity that can, in effect, be directed to spend in an environment where the market, with individuals left to their own devices, will devour itself.

Speaking of the possible bailout of the Big Three automakers, David Brooks says in today's New York Times:

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.

I was disappointed in Brooks' coverage of the election—too much "OK, McCain's acting like an insane jerk, but really, really, he's a good guy and he'd be a good president"—but he has a point here. If GM et al get a straight handout, well, where's the incentive to ever come up with a product people want? Why should straight incompetence be subsidized? Yes, there are jobs at stake but is putting them on the public payroll (which is what a bailout would amount to) the way to go? And the idea of putting incompetent execs on the public payroll. . . . Well, pardon me, while I go throw up.

Obama

It's done. It's over. He won.  

A measure of the times: we have the election of the first black President and we still have to say "Now comes the hard part."

But can there be any doubt that Obama proved himself the best candidate? Clinton and McCain looked like children next to him, the former towing along the Clinton psychodrama and brittle lust for power, the latter exposed as devoid of what was supposed to be his greatest asset, namely, leadership qualities.

Obama: a President-Elect for grownups. Do you think we're up to it?

Obama the ruthless. . . and thank goodness.

From Frank Rich's column in today's New York Times:

"But certainly the single most revelatory moment of the campaign — about the political establishment, not Obama — arrived in June when he reversed his position on taking public financing. This was a huge flip-flop (if no bigger than McCain’s on the Bush tax cuts). But the reaction was priceless. Suddenly the political world discovered that far from being some exotic hothouse flower, Obama was a pol from Chicago. Up until then it rarely occurred to anyone that he had to be a ruthless competitor, not merely a sweet-talking orator, to reach the top of a political machine even rougher than the Clinton machine he had brought down." 

Thank goodness for a Democratic candidate willing to bare knuckle it when necessary.

Just a thought. . .

Hey moron, buy stocks now! They're cheap.

So now that the economy has turned to shit, we're being told by way of consolation that "stocks are cheap." Bargains galore. Don't be depressed—go shopping! Even our prime minister (I'm from Canada), the always tender and nurturing Stephen Harper has told Canadians to look on the bright side and snap up those equity bargoons. The enlightened homeless will soon be leveraging their shopping carts and sleeping bags to buy Intel and Teck Cominco, and then parlay the profits into buying those foreclosed homes in the US (also bargains I assume). 

Yeah, right.

A week or so ago, I caught an interview on CNN (yes, I know how dreadful CNN is, and, yes, I was watching) where one business commentator finally told a simple truth, namely, that stocks, like everything else are worth only what someone else is willing to pay for them. Talk all you want about P/E ratios, NAVs, ROE, and whatever other measures brighter minds want to throw at us, but the truth is that the shares I'm holding are worth only what someone else will pay to take them off my hands. And if a year from now, that person is willing to pay even less, then guess what: my shares are worth less. It doesn't matter what prices were "historically," or what I paid, or how much I protest. The "market" isn't independent of psychology; it is psychology. 

Ever notice those butt ugly sweaters that regularly go on sale? They come in colours that look like baby shit, for example. Like other sweaters, they keep you warm, hide your physique, or whatever. But nobody wants them. That's why they're cheap.