Friday, March 7, 2008

Margin Call.. ing

In an earlier piece, we pointed a finger at Alan Greenspan for what we referred to as a "foundational crack" in the economy/banking system; maybe we failed our readers. The fact Alan Greenspan's Fed lowered rates to 1.25% made money super duper cheap, which is why we coined "irrational speculation" in the Real Estate/Mortgage Markets. But there's more. There's more than just Alan involved in this "Call."

We left out a very important element of the problem; the behavior of Banks and Brokers with that cheap money. My Grandfather Marcin once told me: the father didn't spank little Johnny for losing his allowance at the card game, instead he scolded Lil Johnny because he went back to play again in hopes of winning it back.

And there you have it in a nut shell; Banks and Brokers are like little Johnny. They lost a great deal of their assets through exotic credit vehicles/derivative products. And instead of saying "We surrender”, they kept going back and playing, over and over and over and over and over and over. Now you understand why the words "MARGIN CALL" are being thrown around so much.

We sure hope their behavior doesn't spiral off into the black hole of the abyss. You’re thinking “Maybe the Government will try and help”. Too late, this card game is over.

Psychology of the Call thanks you for your Friday attention, we urge you to return at 2:00pm EST to see the real truth~

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