Monday, November 03, 2008

Some News to Start your Week.

Robert J Aumann the Israeli economist who won the 2005 Nobel Prize in economics has come out saying that the Bailout package designed by Paulson and Bernanke "Weren't Smart" and that ultimately more banks and financial institutions will fail because of it.

``The intervention by the regulators to save the U.S. economy will lead to further bankruptcies of banks and insurance companies,'' Aumann said at a rabbinical conference in Jerusalem yesterday. ``They are only encouraging institutions to take more uncalculated risks.''

I am not sure I agree with this line of thinking, first, with most major banks now being partially owned by the government there is little chance that any board will be allowed to take "uncalculated risks". Quite the opposite I see financial institutions pulling in the reigns big time. Right now corporate sales people and not Hedge Fund sales people are in heavy demand in on the street. On the trading side there are few people in demand currently, but I expect the "plain vanilla" trader to be at least more in vogue in the month to come. The days of the MIT graduate coming in and writing a few spreadsheets and then being allocated capital without everyone having a complete understanding of what is going on is at least temporarily behind us.

CLICK HERE to read the story. Please let me know what you think.

Good Luck and Good Currency Trading.



Anonymous Anonymous said...

Totally agree with your comments. I am bemused by all the armchair quarterbacking that has gone on. It is simply too early to tell what the long term effects will be -- one thing is certain, however. It is that something *had* to be done. Whether or not a Nobel winning economist agrees in retrospect is trivial. He never had to walk a mile in Bernanke's or Paulson's shoes.

What I'm really afraid of is the knee jerk reaction to overregulate that seems to be gripping much of Europe and Asia and could catch on in Conress. I hope the next US Prez has a cool head about things and can buck the pressure from the Legislative to put the screws to American capitalism. (Assuming that such a mindset will develop in the House and Senate -- I don't think it will.)

Incidentally, Israel has its own problems.

2:12 AM  
Anonymous Anonymous said...

I too think Aumann is off base. These banks now have the US Gov't behind them. They will only fail if the gov't fails.

8:31 AM  

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