On Bernanke’s Fed

Ben Bernanke said Wednesday, but the problems in the subprime mortgage market haven’t caused a systemwide credit crunch. Well, I’ll be damned if I missed it.

Bernanke pinned much of the blame for the recent economic slowdown on the

“ongoing adjustment in the housing sector… one risk to the outlook is that the ongoing housing correction might prove larger than anticipated, with possible spillovers onto consumer spending.”

So much for housing not affecting the overall economy. Please note the word: “might”. This means this is yet to happen.

This is also somewhat similar to the investment banks pricing CDOs on how much they expect to make and not on what they may actually return. Everyone is looking in the wrong places and when they see what they should see – a bunch of bogus numbers – Wall Street ain’t going to look so pretty.

Ever wonder what people in the 70s would have said to you if you told them you were seeking 20% annual returns? He’d either think you were mad or he wouldn’t care because “the dollar is worthless” and thus were returns.

How about in the 90s when people were convinced that they could conservatively rake returns of 30%? (If this were so, Bill Gates would now be worth approximately $627 Billion… I hope that makes you laugh).

Oh, how sentiment changes.


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