Time for the Darwinian flush (valuation crisis: Great Read!)

Highlights from the latest Hayman Advisors letter to clients (i.e. the text in full):

‘The ultimate result of shielding man from the effects of folly is to people the world with fools.’ Herbert Spencer

What’s Next? It is the “what’s next” that scares us the most. There is no doubt that many books will be written chronicling the times we are living through today. When we wrote to you in July 2007, we really meant “feet first”! The common denominator of everything that has gone wrong so far has been reckless amounts of leverage. The system both nationally and globally is still trying to de-lever as fast as possible, the problem is that everyone is being forced to do it at the same time. 3-month LIBOR is off the charts - not as many believe, because banks don’t trust each other - but because THERE IS NO MONEY LEFT FOR THEM TO LEND TO EACH OTHER.

Do you think the Government will be successful in purchasing illiquid assets off of the balance sheets of troubled companies? The odds (and the assets) are against them. Even if the Government invests equity to fill the “hole” that is created upon the sale of these assets, it leaves the same nefarious management teams in place to continue the problem by taking the money and levering it up again. The only way to solve this problem is to go THROUGH IT. We know it isn’t politically popular or even popular on Wall St, but the fact is that the U.S. and the world need a Darwinian flush to rebuild our foundations and become even stronger on the backside of this mess.

if Obama wins how long will it be before all the financial news is positive?

He will make bad things much much worse. He will make this thing longer and more painful, and trying to use it to his advantage. That is how socialists stay in power. Make things worse, make people desperate and run to government's arms.

Some people just do not want to listen. Thousands of others have not learned to read and understand. To make matters worse these same idiots claim to know everything.

A short excerpt. The emphasis and paragraphing are mine:

THE WORLD HAS LOST HALF OF ITS EQUITY MARKET WEALTH ($29 TRILLION) since last October. The negative wealth effect will be DEVASTATING.
In the U.S., we are only just beginning to see the strain of tighter credit on consumer spending. As corporate earnings decrease and workers are laid off, the cycle of delinquencies and defaults will get worse.
In Europe, the “real” economy is already in recession in many countries, and there is a guillotine hovering above the necks of most of the Eurozone. Despite the popular belief that European households are not highly levered – many countries including Ireland, the U.K., Denmark and the Netherlands have more household debt than their national GDP and European banks have been as bad or worse than U.S. banks in terms of overleveraging themselves.
The same cycle of lower earnings, higher unemployment, lower spending, and higher delinquency rates will pervade Europe. We believe that the structural nature of the European economy and public policy will only exacerbate the problem. * * *

The problem is global. I excised all other parts of the article. Please read it in detail. 'Nuff said. Oh, well. Nothing to see here. Time to move on.

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