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If there were less political intervention into financial markets then solid financial analysis would win almost every time. Maybe that's the way the world shou
by nugget 9y ago
If there were less political intervention into financial markets then solid financial analysis would win almost every time. Maybe that's the way the world should be.
Since the GFC a lot of macro bets in both US and EU have been bets on political will and central bank actions. In late 2010 Bank of America was technically insolvent (based on analysis similar to yours), but the Fed went to work and backstopped the market in a multitude of ways and the valuation soared. In 2012 I would have bet the farm that Greece was headed into bankruptcy, but the Greek people didn't revolt (as much as anticipated) and so the ECB effectively nationalized most Greek debt across the rest of the Eurozone. I'm no expert but I try to apply these lessons to all new modern crisis I hear about. Underfunded pensions will destroy certain states, or social security will be broke and unable to pay out benefits? Sure; we'll see.
- gameswithgo 9y ago>If there were less political intervention into financial markets then solid financial analysis would win almost every time What empirical evidence exists to support this belief?
- mfoy_ 9y ago"Bailout"
- ChrisLomont 9y agoYou mean loans that were repaid? That were forced on many banks to prevent signaling, to lessen the chance of a run on the banks? That's not the evidence requested.
- nugget 9y agoMy understanding is that if it weren't for TARP several more publicly traded investment banks would have collapsed not to mention wider collateral damage in the market.
- buddylw 9y agoMost agree that TARP was necessary, but QE2, QE3, and very low interest rates appear to have done little more than inflate asset markets and increase debt. They are trying to unwind that now, but falling back to the mean with this much excess is not likely to go well. We left the cast on way, way too long. What's done is done. It'll prove out either way in the next few years.
- allenz 9y agoTrue, but "politics distort prices" does not imply that "without politics, prices are accurate", which is what you claimed. Bubbles existed before Keynesian policies.
- dmix 9y agoThe fact we've replaced (or added) one form of bubbles with another does not make criticizing the other any less valid.