I Just Bought Lehman Brothers (the entire company)

Well we have had quite the week in the financial markets (really this has been going on for over a year). I am not sure if I should be happy I didn't decide go for investment banking jobs or be sad that my firm is losing all the investment banks it has as clients. Either way I'm affected by this, as we all are or will be. Our house's value dropped around 10-12 k in the past two weeks, a total of 30 in the past 6 or 7 months. Pretty gnarly. So much for me trying to time the market and get in low to make some money (in real estate). We'll be lucky to recover our investment at all. Maybe it will turn around - after the looming recession and all-but-certain diamond-de-valuing inflation to follow (or perhaps coincide). Yes, I'm sure glad the Fed thought it would help if it lowered the Federal Funds Rate to near-free-money levels again. Basic economics and money and banking classes have never taught that inflation is a likely side-effect to such maneuvers.

Meanwhile the spike in gas prices (despite the recent mild decline in them) has caused a frenzy of gas-guzzler sales, causing an over-supply of and ultra-low demand for Suburbans, Sequoias, Explorers and the like...and thus the prices are at all-time lows. Blue book values for some of these cars are half their scrap values : ). I've seen 35 - 40 K cars going for 16 to 17 K (with no more 40 than K miles). Pretty ridiculous...especially when the additional expense for gas DOES NOT outweigh the added cost of unloading one of these guzzlers on the market for pennies on the dollar, only to turn around and buy a $28,000 sedan with good gas mileage. But at least it feels cheaper this way! And at least we're helping save Mother Earth. Not I - I'm not buying, no I'm not consuming the pathetic dribble on the news media's chin. We're going to head out and buy one of these ridiculously undervalued chunks of metal and laugh at everyone in their Priuses. Then we're going to burn Styrofoam in our backyard and light ants on fire with aerosol hairspray.

No, I'm all for energy conservation, being wise stewards over the earth, pursuing alternative energy sources...but not in the hypocritical sense some would have us behave. After all, where does the electricity that powers hybrid cars come from? Hamster wheels? We need to pursue solar power, wind power, algae power, whatever other fuel we can invent, and we might as well burn up some oil if we can find it quickly.

But back to the markets, we are in for some rough times. It is time to eat all the mac and cheese and ramen we can - or at least stock up on it. Time to lose weight in an inexpensive way (no, not by exercising or with Weight Watchers' new promotion) : STARVATION. Time to steal all the soap and shampoo we can from hotels and our neighbors' bathrooms. Time to move to the 1 square of toilet paper per deposit method. Time to floss with your wife's hair, and then sell it to Britney Spears. Time to make the most of your milk by re-filling it with water when it's half empty.

I hope through some intelligent monetary policy (let's avoid the fiscal policy - leave the economy to those who know what they're talking about - not corrupt bureaucrats and senators) and some market adjustments we can survive it without losing all confidence in our banking system. I hate it though when people say things like, "it was too complex (the system); they need to get back to the basics of banking." I hate to break it to you, but banking is inherently inordinately complex. Just think of the idea, we're taking money deposited in our institutions and loaning it out/investing it somewhere else - meanwhile, we promise you we have your money still (when we really don't). You can't make something like that simple. Though I agree that we have erroneously been testing out too many theories through the real-world practice of banking. The practice of loan securitization (while it probably won't totally go away) will probably be limited significantly going forward. This will help prevent lenders from approving loans to people whose primary source of income is unemployment - or who don't have a job altogether. It will, however, put the banking system back to the way it use to be (which one could argue was inefficient because the risk was not diversified). Perhaps it could be continued to some extent with a requirement that the initiator of the loan be held accountable for a portion of the loan value (maybe this already exists, speak up banking experts!).

Either way, we're going to see an overhaul of the system, but I don't think it can be less complex. That's like saying the medical profession should simplify brain surgery. Until we get a rejuvenation of the markets, feel free to buy some penny stock and foreclosed homes.