TALKING OURSELVES OFF THE EDGE OF THE CLIFF
by ilene - May 29th, 2010 5:53 pm
TALKING OURSELVES OFF THE EDGE OF THE CLIFF
Courtesy of The Pragmatic Capitalist
Yesterday’s WSJ MarketBeat blog took David Einhorn to task for his op-ed in the NY Times titled “Easy Money, Hard Truths“. They make the argument that Einhorn is simply pushing his massive gold position. I fear Einhorn is doing something much worse – helping to scare us all into continued recession.
First off, I have no problem when someone talks their book. In fact, I almost prefer for people to talk their book. There’s a certain trust in someone who is willing to “put their money where their mouth is”. It’s the primary reason why I believe the hedge fund business is such a wonderful advancement beyond traditional mutual funds – the manager’s interests are generally aligned with those of the investor. If you can find a manager who is not only intelligent, but has a sound moral compass you’ve wandered upon quite a gem. From all accounts David Einhorn appears to fit the mold. But I take very serious issue with his recent comments which I believe are filled with half-truths and propaganda that we continually hear from the inflationistas (all of whom have been terribly wrong thus far in terms of their macroeconomic outlook) who are driving the country towards the edge of the cliff.
Einhorn is a great investor and clearly a brilliant man, but for two years I have watched policymakers and fear mongerers misdiagnose the problems that we confront and this is, in my opinion, why we are still wrangling with these issues. In 2008 I wrote a letter to the Federal Reserve saying that this was a classic “balance sheet recession” with problems rooted in the private sector – specifically the consumer. I told them that saving banks was not the solution and that monetary policy would prove as fruitless in the U.S. as it has in Japan. I was shocked to receive a friendly response to my letter but not shocked to see Mr. Bernanke implement his Friedman-like monetarist campaign of “saving the world”. Obviously it hasn’t worked (unless you’re a banker) as we sit here two years later still discussing this wretched credit crisis and the ranks of the unemployed continue to climb. If we cannot properly diagnose the problems we cannot find a proper cure. Thus far, we have failed.…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.