Cabbage and Turtles
There is an old saying in rural areas that goes " when something smells rotten in the cabbage patch, you just need to look for the head ". Typically, a good farmer would find the stinking, rotten head, cut it out, and throw it in the compost pile with the cow patties, horse puckie, and BS. I don't really think it takes a farmer to figure it out. For example, here in Florida, the highest peak in the southern part of the state is a dump just off the Florida Turnpike at Sample Road... proof, that when something is rotten or useless, even city folk can figure out what to do with it.
The nice thing about compost heaps is something not only the farmers have figured out; anyone with a garden understands that when you pull out things that are rotten or overgrown, and put it in the compost, add a regular helping of dirt, water, some sunshine and the smell goes away. One ends up with a fertilizer like substance that when sprinkled back on good plants, helps them grow.
That said, I can smell something rotten in our financial districts around the world. The stench is the worst when we get close to Wall Street, but I hear from people in London, Frankfurt, Beijing, Hong Kong, Sydney and so on, that the same smell is there, too. It reminds them of rotting cabbage, has a hydrogen sulfide nose, and doesn't seem to go away with a stiff wind. It almost follows one around!
I think the smell, if followed to its "head" will lead us to the leaders of the financial communities that have been living off the land of plenty for entirely too long. Lately we have seen a few of them claiming to be refusing to accept annual bonus payments this year. We are talking totals of billions of dollars of bonus (just to keep employees from leaving and going to the blood sucking hedge funds where they can earn even more ill-be-gotten income). They also claim to not be paying out the levels of bonus to the senior employees that they have in the past. When they open their individual mouths, you can just get a whiff of the smell, but collectively, they stink.
When I got my latest whiff, as I read a financial report, I decided to start looking for the head cabbage, and found him in the US Treasury Department... Secretary Henry Paulson. Before getting this position he was the Chairman and CEO of Goldman Sachs where he made hundreds of millions of dollars promoting many of the strategies that have recently gotten the economy of the globe into financial trouble. Why are we not looking to him for answers as to why there is a smell? Why is he still in his job? Oh, one can excuse him because his company wasn't the biggest ring-leader... that's why they too had to write down tens of millions of dollars of exposure to sub-prime mortgage derivatives!
The stench is all through the various companies that have been involved in the sub-prime mortgage debacle, and the bundling and trading of the derivatives of those mortgages. The development of the scenario we are living through now, likely resulted from some propeller head mathematicians who convinced the leaders of the largest financial houses (like Goldman Sachs) that they could make money on these. At the same time, the financial houses had to lobby politicians to not put rules or laws in place that would limit this trading, and require full documentation of the risk involved. Now folks who know me, know I am not a mathematician (I needed spell check just to spell it) but I do have a good nose and I know there is something rotten in all of this. The large financial houses came up with these strategies, and now we are letting them get away with the ...
o one is being excised, and thrown in the compost heap or even the dumps of the financial districts. Why is that? Probably because the rot goes all the way through the cabbage patch! There is a fear that if we start throwing out the bad parts, there might not be enough left for the resulting fertilizer to nourish. But that doesn't mean that we can't get to the biggest stinkers! It does mean that we have to demand that something be done, and done now! We can't let these rotten executives get away with ruining the lives of countless people. I'm not just talking about guys like Bernie Madoff (who would still be running his Ponzi Scheme if the sub-prime mortgage debacle hadn't undermined the investments of the people he was ripping off making them have to call him for cash to cover their margins and losses).
I am referring to the Chairmen and CEOs of all the companies that were involved in the selling of sub-prime derivatives when they didn't understand them, when they didn't do their due-diligence, and sucked the investors who trusted them and looked to them for investment advice. Throw them into the compost piles. Demand restitution of all ill-begotten bonus payments that were based on the upswing of those mortgage derivatives. They say it can't be done... perhaps we should remind them that it was once said that a black man would never be elected President of the United States of America.
We have to do something, or we will start to smell the stench coming from the offices of the various States Attorney General around the country. Perhaps they don't want to throw out their rich buddies!
All of which comes back to the Turtle in the picture with its camoflage of green algae and duck week. He carries his house around, moves slowly, but steadily forward. Turtles rarely stick their necks out too far, use their tails as a rudder in rough water. They lay their eggs deep in the sand and protect themselves from the elements. They have survived millions of years with this strategy, and live very long lives. I have the Turtle at this masthead, because I suspect that he is a great mascot for my future investment strategy.