August 13, 2007

Chairmangreenspan Bernanke to the Rescue. Not.

Ben Bernanke is the new chairman of the Federal Reserve Board. The proper way to address him is Chairmangreenspan Bernanke.

Chairmangreenspan Bernanke is now being asked to save Wall Street from itself, which is funny because Wall Street A) doesn’t deserve to be saved; and B) doesn’t need to be saved, because nothing is going to happen to it. Which is why Chairmangreenspan Bernanke probably won’t do anything to save it.

The problem on Wall Street is the usual “jitters.” This is the all-purpose term to describe anything that happens on Wall Street, or even things that have nothing to do with Wall Street, but will nonetheless be identified as the reason for what happens on Wall Street.

Reporters who cover the stock market have no idea how it works or why. Neither do most of the people who buy, sell and trade. So why did the market do this or that today?

Uh, must be . . . “jitters.” Sounds as good as anything.

Anyway, the U.S. economy is growing like crazy, unemployment is at a 20-year low and corporate profits are breaking records – all of which has the stock market soaring. In July, for the first time, it topped 14,000. (Don’t ask me “14,000 what?” No one knows. But trust me, that’s a lot of whatever it is.)

When August arrived, the market “corrected” a bit – closing last week at 13,239 whatever-they-ares, which is less than 14,000, but still higher than any other level in stock market history prior to three months ago. So, still pretty darn high, right?

Let’s check the headlines:

DISASTER! MARKET CRASHES! IT’S 1929 ALL OVER AGAIN! NEST EGGS SMASHED!

It’s a bit like Magglio Ordonez, who plays right field for the Detroit Tigers and not long ago was hitting a stratospheric .380. He’s now hitting a still-league-leading .357. If the people who cover Wall Street ran the Tigers, Ordonez would be headed for the minor leagues.

Of course, corrections do have specific reasons, and this particular market correction has a lot to do with too-easy-credit, especially for home mortgages. You know those people who will give you a mortgage even if you can put nothing down and you have no credit history? They’re not really helping you if you’re going to end up in default, and they’re not really doing the market any favors when they create lots of defaults – and capital available for lending becomes scarce.

Wall Street’s solution is for Chairmangreenspan Bernanke to prime the pumps and put more bills into the money supply. That will ease lending pressures, they say, and supposedly make the Wall Street crowd less “jittery.”

The D.F. Krause solution is for Chairmangreenspan Bernanke to do nothing. Let the jitterers jitter. 13,239 is a lot of, you know, those things. If people lent money they shouldn’t have lent, and now they’re going to lose their shirts, I don’t really see how that’s a problem in need of a solution. That’s what’s supposed to happen when people make dumb decisions. If people invested in those lenders and now they’re going to lose their shirts as well – too bad, so sad. Make better choices next time.

The value of the U.S. dollar is so low, it’s almost even with the Canadian dollar! I’m going to spend a weekend in Toronto in a few weeks and now I’m not going to be able to get cheap food. The last thing I need is Chairmangreenspan Bernanke cranking up the printing presses and further devaluing the dollar, all because the stock market is at “only” 13,239 and a few idiots who did stupid things are going to have to pay for it.

Wall Street is a silly place where everything is magnified, over-reacted to and over-analyzed. Whatever happens there today will be “corrected” tomorrow, but the general direction of the market’s value is always up.

So how do you “solve its problems”? It has no problems. Just smart people who get rewarded and dumb people who get ruined – all of which is exactly as it should be.

I hope, and think, Chairmangreenspan Bernanke just might understand this.