2.26.08

Ave, Jeffrey Robinson!

The bunny has been working the phones, trying to assuage the nagging suspicion that's been buzzing around his brain like a noisy gnat. He would much rather be getting familiar with his Tibetan cousin (Ochotona himalayana), but once again, humanity has driven him to distraction.

What's been driving the bunny batty lately is the rapid insinuation of sovereign wealth funds' capital into large financial institutions. It's not that SWFs are anything new (indeed, one early bird wormed out the fact that this vehicle's make dates at least to 1956), but the speed with which they have amassed container ships of cash for immediate injection into badly battered banks (can you stand all the alliteration?) without much need (nor, indeed, requirement) for oversight sets the bunny's incisors on edge. In fact, it's worrisome enough that Bob Davis at the Wall Street Journal got a front-page above-the-fold slot today for putting his finger on the swollen, throbbing problem at the heart of the matter:

"Executives from the world's largest SWF--the Abui Dhabi Investment Authority--and from the Government Investment Corp. of Singapore met Thursday with a US Treasury delegation led by the assistant secretary for international affairs, Clay Lowery. The talks are part of delicate global negotiations to draft rules to oversee the behavior of such funds, without discouraging them from investing in the US, Canada and Europe at a time of global financial turmoil."

The bunny would like to thank Mr. Davis for his deep visceral grasp of such a thorny obstruction. How does a UBS or a Citigroup, both of which have received massive capital transfusions from SWFs recently, respond when a simple request for transparency is met with a resounding "Hell, no" in various languages?

Mr. Davis is not alone in such sentiment. In the New York Times on 2/9, Steven Weisman wrote that "leaders of funds in Russia, the Middle East, China and other parts of Asia say that the West's demand for regulations is hypocritical in light of the failure to regulate European and American banks and hedge funds."

To be fair, some SWF captains have read the entrails and are acting accordingly. The China Investment Company (CIC) has gone out of its way to rise above the veil of secrecy for which SWFs are widely known, according to an article in the Financial Times by Andrew Wood on 2/4. Morgan Stanley, which rates CIC the sixth-largest SWF by assets (~$200 billion), was quoted in the same piece as predicting CIC would be the largest SWF by 2009.

Also, to be fair, the growth of SWFs can be tied directly to two factors--the astounding spike in oil and gas prices, and the massive accrual of savings, particularly in nations hardest hit by the Asian financial crisis of 1998. Neither one of these factors is illegal. And, in fact, the reversal of fortune displayed in the flow of capital from emerging back into established economies is, in the words of an Economist editorial from 1/19, "proof that capitalism works."

Ah, but is it? This is what bothers the bunny, and where the aforementioned Mr. Robinson comes in. This gentleman is the author of THE MERGER and THE LAUNDRYMEN, which chronicle (respectively) the mechanisms by which criminals optimize old-fashioned illegal moneymaking schemes in the modern age, and how they "wash" the proceeds through the digital economy to make "black" money "white". If 2% of assets traded worldwide are controlled by SWFs (this according to the Economist), Mr. Robinson notes that it is worth remembering that 2% of global GDP is black money. It therefore stands to reason that at least some of this black money would wash up in SWFs, though how much would be very difficult to quantify, not least because the fund managers probably cannot effectively document the origins of the money in their coffers themselves. So if some of the funds going into a UBS or Credit Suisse come from illegal drugs, or from the bodies of teenage prostitutes hooked on said drugs, or from the sales of guns sold to their pimps by rogue militas, what then? Mr. Robinson points out that while the US government claims jurisdiction over all financial crimes committed in US dollars (through the Treasury Department's Financial Crimes Enforcement Network, or FinCEN), it is in fact extremely difficult to enforce its own regulations across borders (case in point--BCCI).

Moreover, he points out that beyond the difficulties of auditing a foreign government, quantifying and qualifying its assets, and if necessary trying to impose a different government's set of rules...would you really want to? There is an estimated $7.5 trillion in offshore money today, he says, a good 10% of which is likely to be black money, mostly from drugs. If this kind of wealth were wiped out by a magic wand of uber-legislation, the ensuing wave of bankruptcies would likely usher in a new dark age.

This issue isn't going away anytime soon. The bunny will keep on digging, as is his nature.

(Emails to FinCEN at the US Treasury Department were not returned as of this writing.)


Begin at the beguining, bunny:

"The Invasion of the Sovereign Wealth Funds" (p.11) and "Asset-Backed Insecurity" (pp.78-80), The Economist, 1/19/08

"Asia Is Opening Up and Welcoming External Help" by Andrew Wood, Financial Times, 2/4/08

"Overseas Funds Resist Calls for a Code of Conduct" by Steven R. Weisman, New York Times, 2/9/08

"US Pushes Sovereign Funds to Open to Outside Scrutiny" by Bob Davis, Wall Street Journal, 2/26/08

1/27/08

You’ll have to excuse the bunny for a moment.

He’s had enough and is losing his cunicular cool.

This past week’s inter-meeting rate cut struck him as precipitous, political, and most of all, panicked. That it was motivated at least in part by the fact that other nations’ financial institutions are prone to the same human greedworm eating away at our own (Société Générale? Belgium’s Fortis, England’s Northern Rock, and the UAE’s Abu Dhabi Commercial Bank are all adding to that bitter bouillabaisse, just to name a few). The blatant pandering of the pols has spread to the Fed, and the bunny just can’t take it anymore.

To recap: it is not the Fed’s job to babysit Wall Street (nor to police it—that’s what Treasury’s for). The Fed’s mandate is twofold—first, to promote full employment, and second, to maintain a sound monetary policy to prevent the sort of hyperinflation and bank runs that lead to widespread misery, xenophobic massacres, and pseudo-intellectual pontification that’s the verbal equivalent of an M.C. Escher drawing. Incremental rate adjustments over measured periods (and none at all in election years) help keep the Ship of State on an even keel. Taking a halberd to interest rates, especially when other central banks around the world did not, can only appear as a declaration by the Fed of a state of emergency with which other governments (friendly or otherwise) do not seem to agree. (Never mind that rate cuts take 6-12 months to make their way through the national economy, a period only slightly less than the length of the last two recessions).

Why would Wall Street expect another 50-point cut this coming week, taking rates to 3% (or, the bunny shudders to think, even lower)? Again, the answer is twofold. First, it means that things are worse than the Fed admits to, and second, the Fed is letting Wall Street dictate its moves. This would be a political decision, and a hruffy, murthified one at that. It would be an outright invitation to inflation. Is this a dollar I see before me, getting ink on my clean white paws? Why no, the bunny declares hothfully, it is less than a dollar, and the dollar will continue to be crushed should rates continue to be scythed, not to mention a spike in already spiking import prices. Ur grubba naar, hraf fuffing shoom bletzkwell! Phlap wabble therwin potok! (When the Rabbit Rage is upon him, the bunny's first victim is verbiage.)

Politics and politicos, gentle reader, are bad for the bunny's brain, as you have seen, and even worse for economic policy. Let us hope that in the weeks ahead, cooler heads prevail over itchy trigger fingers.



Bits o’ Bunny Collateral Damage:
“Evolution of economy will tell whether Fed overreacted” by Krishna Guha, Financial Times, 1/26/08
“The start of the great unwinding”, editorial, Financial Times, 1/26/08
“Société Générale’s Sales May Have Incited Market Plunge” by Nelson D. Schwartz and Nicola Clark, New York Times, 1/26/08
“Stimulus Deal Spurred by Fears of Voter Backlash” by Michael M. Phillips, Sarah Lueck and Sudeep Reddy, Wall Street Journal, 1/26/08
“A Global Fed”, editorial, Wall Street Journal, 1/26/08
“Mideast banks to report subprime losses”, Reuters, 1/26/08

1/21/08

So who's worried?

After all, despite a $150 billion bad-loan sump, the global finance system hasn't collapsed, right?

And despite a year-over-year inflation spike of over 4% and global commodity prices indices at new highs, manufacturing hasn't collapsed, right?

And just because of dismal seasonal retail sales, a widening trade deficit and unprecedented and yet-uncharted credit card defaults, the consumer economy hasn't collapsed, right?

And just because incumbent and incontinent politicians alike are one-upping each other with emergency stimulus packages designed to put negligible amounts of tax-relief cash into the hands of voters least likely to save it thanks to lowering interest rates and prior to the elections that will shortly be followed by massive tax increases, the matrix of civilization (or at least its 24-hour news cycle) hasn't collasped, right?

The bunny would like you all to take a moment to relax and pass hraka. (He duly bobs his hirsute head to Richard Adams.)

On the last point especially would he like to focus his energies. That the US economy is in the midst of contraction is uncontested, and attested to by the frenzy with which the carping constipated corps of politicos, pundits and pen-wielding press pests is howling for more gruel and grist. Tax cuts. Lower interest rates. Bad loan bailouts. Cash on the barrelhead. With each news cycle, more mouths join the banshee choir.

The bunny has no patience for such nauseating drivel. Unlike many of his mammalian brethren, the bunny does not possess the ability to regurgitate hairballs after grooming, relying instead on the bounteous nature of timothy hay, which, like kasha, bulldozes the badness back and beyond. In bunnies, as in the great rivers of the world, the current goes one way.

The media maelstrom also obscures what is in fact an old tactic deployed on a new playing field: political use of money (or monetary policy) to curry favor at election time. He (or she) pushing payouts pre-primary is more likely to effect the short-sighted worried about mortgage or credit-card debt, as opposed to later (and potentially felonious) dangerously deferred tax debt, while he (or she) champing cheap money (i.e., immediate rate cuts), which are the darling of institutional investors such as hedge funds (which themselves are not above the occasional donation to a candidate's war chest) might also be (already) forgetting the fact that cheap money was what ignited the subprime storm to begin with. And 5% national unemployment is historically considered full employment (and compares favorably with economies of scale across the pond). And that, very quietly, the core blue chip companies of the S&P have been racking up earnings well beyond what's needed for ballast in these roiling 1Q '08 waters.

The bunny does not deny that there is some serious skinning going on. But this flensing should also be viewed as a cleansing. A 15% correction is still a correction; markets go down as well as up. This is part of the business cycle, the corrective mechanism by which, eventually, the ship of state of things rights itself with keel down and mast held high. What's different from 2000-2002? No foreign attacks? Well, actually, the bunny is wrinkling his nose at the increasing bankrolling of US financial nodes by foreign sovereign wealth funds (but hey, beggars can't be choosers). He has been grinding his teeth over this, and will in postings to come. Among other worries, he would like to know how you get the investment arm of an entire country to open its books; he knows of no lawyer-subhumans with this sort of suction, and very much doubts the political clot has such clout either.

The bunny watches.

The bunny waits.

The bunny is back.


Things that line the bunny's box of late:

"The Invasion of the Sovereign Wealth Funds"; "Asset-Backed Insecurity"; "A Delicate Condition"; "Economic and Financial Indicators", The Economist, 1/19-25/08

"'Til Next Paycheck, a Stimulus" by Michael Santoli, Barron's,1/21/08

"Adjustment or Affliction? Why the Dollar's Drop is Failing to Rebalance the World" by Chris Giles. Financial Times, 12/11/07

"No Quick Fix to Downturn: Some Fear Stimulus is Already Too Late" by Peter S. Goodman and Floyd Norris, New York Times, 1/13/08

11/2/07

The bunny feels betrayed.

All week long he has read nothing but dirty disclosures from top banks about their exposure to the subprime morass. Writedowns, shakeups, CEOs falling on hundred million-dollar swords. It seems each new announcement brings a triple-digit swing to the indices; p/e ratios are so compressed as to muddle fair valuation.

The bunny is so dispirited he could just bypass this whole edition and go to sleep. But that would be unfair to you.

So he will focus on two examples—no more.

Just when you thought it couldn’t get any worse with Citigroup, those early birds at Dow Jones have announced the company is holding an emergency meeting this weekend. (That’ll mess up some golf games.) Is it a Star Chamber to decide Charles Prince’s fate once and for all? For a spin session to try to put a brave face on the prospect of further writedowns, which may affect the company’s ability to pay dividends, which may make shareholders bray for blood? (The bunny is reminded of Georges Danton’s last request to his executioner: “Show my head to the crowd—it’s worth it.”)

This is the biggest bank in the US we’re talking about. The bunny is lop-eared with dismay.

Now, on the far side of the pond, UBS, which has already been bled by the slings and arrows of outrageous fortune, is now being forecast to take another $5 billion in Q4 subprime losses—this is on top of the three billion-dollar loss they’ve just reported. (Okay, that’s an extreme call, from a Merrill analyst—Bear Stearns is only calling for a $2 billion hemorrhage.)

This is a conservative, clients-first Swiss bank, the kind you trust to protect what assets you have when the Nazis are about to invade or the collapse of Communism is set to unleash internecine tribal warfare next door. Now the bunny is supposed to believe that this stalwart European colossus is but a house of cards? Say it ain’t so, Roh!

Neither the bunny’s brain nor his heart will take any more.. He senses a familiar chill in the air, an early darkening of days. It’s time to go to ground.

Bunny milestones of woe:

“UBS Reports a Larger-Than -Expected Loss” by Nick Cumming-Bruce, New York Times 10/30/07
“UBS May Take $5.2 Billion Q4 Subprime Hit” by Steve Goldstein, Marketwatch.com, 11/2/07
“Merrill Lynch Downgrades UBS” by Ramya Dilip, Reuters Research Alert, 11/1/07
“CIti Shares Up on Board Meeting Report”, Reuters, 11/2/07
“Analyst Raises Doubts About Citigroup Dividend” by Eric Dash, New York Times, 11/2/07
“CIBC’s Whitney Spurred Market Swoon on Citigroup Call (update 2)” by Nick Baker and Michael Patterson, Bloomberg.net, 11/2/07

10/15/07

Welcome to the view from the cliff.

The 20^th anniversary of the biggest one-day stock market plunge to date comes after a torrent of bad news. But one thing stands out from the rest of the morass, one ominous cumulus that portends the sort of mayhem that makes the bunny feel as though he is once again peering into the abyss.

No, it wasn’t the New York Post-style screaming banner of this week’s Barron’s (BLACK MONDAY!!!).

It wasn’t the clever Doomsday headline of the Wall Street Journal piece from 10/11 (“The United States of Subprime”), which for the first time the extent of the mortgage mess, and in so doing drove home the point that it is much, much worse than even the most blindly optimistic liar shoved in front of a CNBC camera crew can dismiss.

It wasn’t Landon Thomas quoting Paul Tudor Jones II quoting Robert R. Prechter in the New York Times on 10/13 that the market is set for the biggest bear mauling since 1929 ( hangin’ ten on dat Elliott Wave, brah).

It wasn’t the viral analogy in the very next day’s Times comparing the America’s financial sniffles (which apparently no longer infect the rest of the world) to the pathology of that dastardly bastardly bug influenza.

It wasn’t a torrent of big banks and brokers coming out with multibillion-dollar losses lo the live-long week.

It was Leslie Norton’s feature tucked within the raven wings of the BLACK MONDAY!!! edition of Barron’s, describing the Chinese comet, a stock market making triple-digit percentage jumps year after year. Not only is the dragon flying to yet untrammeled chakras on high, but gweilo investors are chasing said dragon in droves; the bunny nearly choked on his alfalfa reading about how the U.S. Global Investor China Region Opportunity fund (USCOX) is up 73.4% in one year.

Now, it is true that rabbits are social animals, huddling together in their warrens to share warmth and food. But even within such groups, there is an alpha buck, one who crouches alone to master his fate by himself. Such is the lapine scribe of this blog you now peruse. And this solitude gives the bunny the long view of the meditative monk. What he sees is the next rush of lemmings over the cliff (a distant relation by dint of biology, gentle reader, not one the bunny is proud of). Why, the bunny wonders, do humans invest in packs? Chasing the flavor of the moment, all the way back to those dreamy Dutch tulips, hive mentality reigns supreme. It is yet another case of sheep following sheep (astute readers will notice how people have lost their human identity in this edition—the bunny is nothing if not subtle).

The Chinese bubble is but one among several growing around the world, and as prices rise, instead of walking away, het-up homo sapiens rush to grab the comet’s tail in the hopes that (now severely devalued) dollars will rain on their eager upturned faces.

The bunny will take bunker philosophy over the philosophy of crowds any day.

Bunny bullets:

·“Just How High Can China’s Shares Fly?” by Leslie P. Norton, Barron’s, 10/15/07

· “A Pause To Recall the 1987 Crash” by Conrad De Aenlle, and “Sniffles That Precede A Recession” by Robert J. Shiller, New York Times, 10/14/07

·”The Man Who Won As Others Lost” by Landon Thomas Jr., New York Times, 10/13/07

·”The United States of Subprime” by Rick Brooks and Constance Mitchell Ford, Wall Street Journal, 10/11/07

10/5/07

YEEEEEE—HAAAAAAA!

All the pent-up energy building since the dog days of August has finally exploded in a cascade of inexplicable investor frenzy, driving the Dow and S&P back through their July highs and beyond. (Even the Nasdaq is a little over half its March 2000 value!) All this is coming on the back of oil at an all-time high. And gold at a 27-year high.

The US dollar is at an all-time low against most major currencies (touching $1.42 to the Euro). US Treasury prices are on the decline (the yield on the 10-year note is hovering around 4.53%). And the US housing market, long the boost behind the economy lo these last five years, is in its worst slump in history.

Major homebuilders and some large money-center banks are posting horrendous third-quarter results and drawing up layoff lists. The wave of M&A activity which reached arc-welding temperatures in the first half of this year froze solid in August and is only just beginning to thaw. And politicos, pundits, and pugilistic pontificators alike have been whacking around the R-word tetherball again.

What the hell?! Why is this happening? Has night become day, down become up, fuschia become the new black? This has the makings of being one of those bottomless conundrums of the universe, like abiogenesis or the fact that if Pac-Man were three-dimensional, he would resemble a French cream doughnut.

It is the instinctual impulse of Oryctologus cuniculus to discern the cause of the mania, rather than simply embrace it. Dem’s dat does, commences ta perishin’, once the teeth and claws come out. (And they always do.) O, temptation is strong and omnipresent; to just chalk it up to human pigheadedness, as the Financial Times’ John Authers succinctly put it in his 10/3 editorial, “Party Like it’s 1999?”: “The instinctive reaction of many in the fixed income markets is to put this down to stupidity. Equity traders simply do not know what they are doing, or at least do not understand the ramifications of the damage that has been done to the structured credit market.”

Zounds. The bunny thinks the good columnist might be on to something here. For months, he has been experiencing a sense of déjà vu. Maybe it’s been the preponderance of hedge-fund Capulets and Montagues dueling at the Red Cat and Gotham Bar & Grill with flashes of gold and platinum plastic (distinguishable by their French-cuff shirts with dazzling cufflinks, made more visible by the absence of jackets and ties). Or perhaps it’s the eerie similarity, not just to 1999 but early 2002, in which a Fed rate cut dovetailing with a cut on overseas tax earnings pull a US economy mired by recession and the fallout from 9/11 out of stagnation and into—a bubble. (Some have made the case that not only 2001 begat 2007, but 1998, with its rate cut following the Asian financial crisis triggering the dot.com bubble, begat 2001—karma bows to no one.) All the elements are in place—a Fed rate cut, lenient capital-gains tax rates, and a weak dollar which is now favoring large-cap multinational corporations which book a higher percentage of profits from their overseas operations. And the plunging greenback’s overseas effects may not look so bad from a Beltway standpoint. While being able to claim that a weak dollar helps goose exports and lower the trade deficit, it also functions as a tariff-without-a-tariff on those from whom we import manufactured goods (i.e., China), and puts inflationary pressure on those from whom we import commodities (i.e., Saudi Arabia).

This has made for an environment favoring capital flight—whether into the bonds of foreign governments paying higher rates of interest than our own, currencies stronger than our own, or the flavor-of-the-moment investment with the wide-ranging title “emerging markets”.

The bunny does not waver from his dictum that Cheap Money Creates Problems. Bond traders are betting that today’s jobs data will preclude another rate cut at the next FOMC meeting later in the month, but the bunny begs to differ. The next bubble isn’t coming, it’s already here, and the markets setting new records despite the ever-lengthening shadow of the unwinding subprime mess might just bear him out. The hedge funds and buyout firms now squealing like rats in the vacuum of a fast-sinking ship grew out of such a troublesome witch’s cauldron. Capital is no longer flowing into the US in record amounts, but out of it.

And yet Wall Street is whooping it up like the cowboy out on the town at the beginning of Near Dark, and he got exactly what he was looking for. The game will end (and it always ends) once the money stops being cheap, and the signals of the tightening that precede it are already evident. The bunny is well-attuned to listening for the sound of bared fangs in the night, and he knows that no amount of whoopin’-it-up can stave off the whuppin’ those pointed canines carry.

But hey, who’s worried, really?

A selected bunny bibliography:

“What Bad News? Stocks Roar to a Record High” by E.S. Browning and Justin Lahart, Wall Street Journal, 10/2/07

“Party Like It’s 1999? Faith in Emerging markets Fuels an Equity Market Rally” by John Authers, Financial Times, 10/2/07

“Dow Hits Record Despite Losses at Big Banks” by David Reilly, Robin Seidel, and Carrick Mollenkamp, Wall Street Journal, 10/2/07

“Stock Strength Seems to Belie Economic Reality” by Justin Lahart, Wall Street Journal, 10/1/07

“Multinationals Drive US Rally on Weak Dollar” by Francesco Guerrera and Michael Mackenzie, Financial

Times, 10/3/07

“Emerging Markets and Oil Bubble Up” by Justin Lahart and Joanna Slater, Wall Street Journal, 9/20/07

“World Economy in Flux as America Downshifts” by Michael M. Phillips, Wall Street Journal, 9/20/07

“Falling Dollar Squeezes US Trade Partners” by Joanna Slater, Wall Street Journal, 9/21/07

“Our One-Dollar Dilemma” by Judy Shelton, Wall Street Journal, 9/27/07

“Housing Chill Grows Worse, Bites Consumers” by Sudeep Reddy and Michael Corkery, Wall Street Journal (date unknown)

“Merger Frenzy Winds Down After 6 Years” by Dennis K. Berman, Wall Street Journal, 10/1/07

“Treasurys in a Fog Over Rates” by Deborah Lynn Blumberg and Laurence Norman, Wall Street Journal, 10/3/07

“Stocks Rise, Through it All” by Peter A. McKay, Wall Street Journal, 10/1/07

“Cautious Words from a Chastened Bull” by Henry Blodget, New York Times, 10/3/07

8/12/07

"Let them eat cake" is the phrase usually (and probably mistakenly) attributed to Marie Antoinette, referring to the starving non-manicured classes beyond the Versailles hedgerows.

The bunny would add his own version, updated for the present: Let Them Go Broke.

The current Fed helmsman Ben Bernanke is caught up in history, much like newlyweds who buy a home and commence to renovate it only to find that the plumbing is shot, the foundation is skewed and the whole place is haunted by the ghosts of a Waffen SS unit.

Oh, how fickle humans are, chortles the bunny to himself. Life truly is show business--you're only as hot as your last hit. For those without subscriptions, the bunny offers this tasty summation by Alan Abelson in the 8/13 issue of Barron's (p.7):

"Mr. Greenspan, lest we forget, went far beyond the call to entice people, no matter what their circumstances, into buying a home by whacking the cost of credit to as near zero as you can get and still lay claim to being somewhat rational, and urging them to go for those new-fangled adjustable mortgages with deceptively low initial interest rates...As his successor, gentle Ben Bernanke, is no doubt becoming ruefully aware, creating a mess is easy. The trick is in knowing when to slip out, leaving someone else with the job of cleaning it up. And here Mr. G. has proved himself an undisputed master."

Such adroit verbal fencing tickles the bunny's fancy. After all, it's no secret that the current round of bloodletting is due to past Fed policy of cheap money--something the bunny has railed against with abandon in blogs past. Low rates and easy credit a bubble did make. Bursting it is! (For no apparent reason, the bunny channeled Yoda for a moment. Chalk it up to cable TV.) But, ever a keen student of history, the bunny knows this (and the consequent round of chapter 11 filings) is the corrective mechanism of markets at work. Bring on the leeches.

Oh, but if only they would. Instead, the Fed injected billions into the system to keep its glands moist, which smacks of (yeechh!) bailout. But even beyond pleas for cash, the ambient noise machine is now droning for a rate cut--which would only make matters worse. Hedge funds, mortgage lenders and other assorted bottomfeeders who sculpted this steaming bolus would merely go back to their sordid practices, driving us past the ridiculous right into what Mel Brooks in Spaceballs termed simply "Plaid". A rate cut (which Mr. Bernanke, to his credit, has steadfastly resisted, a practice which has probably gotten him crossed off the A-list of every top-tier party circuit from East Hampton to Grand Cayman) is wrong on every level, not least of which is the message it sends to the wrongdoers. It raises what Louis Uchitelle called "'moral hazard'--meaning that the risk-takers who brought on this panic would feel bailed out and likely to do it again" ("Opinions Are Plentiful, as Bernanke Faces His First Crisis", New York Times p. C1, 8/11/07). The logic is simple. If you went away for the weekend and your child turned your bathroom into a meth lab, would you buy him an iPhone? Let the corrective mechanism work--if a thousand hedge funds (of the nine thousand or so which have rather suddenly sprung up in recent years) go under, risk is removed and markets will stabilize. The bad seeds will be purged to make room for a healthier crop. Wall Street works best striving for homeostasis, it is intestinal. Overreaching, running too hot, too much oily spicy food and what have you got?

Bankruptcy, not bailouts, is the markets' Maalox, greedy bipeds, cautions the bunny. Listen to the bailout brayers do not. Let them eat cake--if you stick with timothy hay, the Great Bowel will smile upon you.