No sooner had I sat down than Jim Willie
of the Hat Trick Letter said, "The total of all
US$-based mortgage bonds is $10.4 trillion." Well,
immediately, I am lost and confused, as I thought
that this was a free, "get acquainted" luncheon,
and anyway, I cannot conceive of such a large
number as a trillion, so let's move on to another
topic, such as "Where is the food and is there an
open bar?"
But optimistically thinking
that maybe I will somehow "get it", Mr Willie goes
on, "A conservative estimate of the prime
mortgages within this giant mass is $7 trillion.
We all know it is more, so bear with my lowball
for argument's sake."
At this point, I was
feeling even more alone and scared, partly out
of
fear that there was not going to be any "free
lunch", but also because apparently everybody but
me already knew that the total mortgage mess was
going to be more than $7 trillion! But I didn't
know! How come nobody ever tells me these things?
And why do they keep insisting that I do my own
work for a change and stop being a lazy,
demoralizing parasite that is always leeching on
everybody else's research around here (and this is
where it gets weird, as the whole office chanted,
in perfect union) "For a change!"
Suddenly
more paranoid than usual, my eyes narrow into
slits, and I sweep the crowd with my suspicious
gaze as he says, "The prime mortgage bond index
measures an aggregate of prime-rated bonds
scattered across the beleaguered 50 states,
varying over loan size from large to medium to
small. The 'AAA' mortgage bond index has lost a
whopping 30%, a fact that continuously eludes the
big bankers and their legion of obsequious
monitoring mavens", and the estimated $1.4
trillion in subprime mortgages, as representative
of the "BBB" mortgage bond index, "has lost 80% of
its value".
Suddenly, I am back in the
conversational game! I know what a 30% loss is,
and I know what an 80% loss is, too! Many things
are still a big mystery to me, but I know all
about losses! I start to raise my hand as my
clever way of interrupting and monopolizing the
conversation, and then I stop and think to myself,
"What if he challenges me to come up with the
total dollar loss?"
Thankfully, I was
spared any attempt at computation when Mr Willie
says, "Simple math, within the grasp of a
9-year-old kid, results in prime mortgage losses
amount to at least $2.1 trillion. The kid might
have trouble with all the zeroes though, and even
be confused by what a trillion is."
In
defense of those of us who come to Earth as
ambassadors of intergalactic goodwill from other
planets, and those creatures native to this planet
who are either a 9-year-old kid or has the
intelligence of a 9-year-old kid, or both or all
three, or more, I proudly say that we aggregated
dimwits already know that a "trillion" is a hell
of a lot of something.
And we know that a
trillion is big lot of something that has no use
to us whatsoever, as our shared evolutionary
mathematical system is limited to things such as
one bucket of fried chicken to go, "two is company
and three's a crowd" in some circumstances and
"the more the merrier" in others, the par-four
hole followed by a pesky par-five-dog-leg-right,
and the six-pack. End of mathematical system.
And it doesn't help those of us with such
limited intelligence to have it explained to us by
saying something like, "A trillion is a million
millions", because even IT is too, too much.
Then he says, by way of explanation, "A
trillion is a million millions", and I groaned
aloud, as I can see this is getting us nowhere,
and if I wanted to go nowhere, I would go to one
of those court-ordered "therapy sessions" and
defend myself against my family's shrill
denunciations and baseless accusations of
so-called "therapists".
My lips trembled
as I contemplated how much money has been lost,
and will be lost, but I fortunately never got
started, as he immediately went on to reveal that,
"subprime mortgage bonds have lost over $1.1
trillion. If subprime bonds have lost a trillion
dollars, why cannot supposed experts estimate that
the total asset backed bond losses to be at least
a cool trillion dollars?"
Suddenly, we're
talking trillions! As in, "trillion, the plural"!
At this point I suddenly needed to catch my breath
and gobble down a couple of nitroglycerine pills
so that my heart would stop rapidly going
thumpa-thumpa-thumpa and radiating excruciating
pain across my chest and down my left arm.
As their effect worked its cardiac magic,
I could still feel the icy hand of death clutching
at me when he said, "Add the two numbers from
subprime and prime together to reach $3.2 trillion
in their bond losses." Gaaaaahhhh! I'm dying here!
How in the hell can you lose $3.2 trillion in a
$14 trillion economy? It doesn't make sense! Call
the paramedics!
My brain was shutting down
at the cognitive dissonance between what I see and
what I hear from "official sources", and I could
feel my bowels starting to let go, too, which made
me smile because at least I could leave a powerful
non-verbal editorial comment that truly, truly
conveys the complete sense of disgust that I feel
about all of this Federal Reserve mess as I pass
through to the "other side".
So it is with
things getting dark, my senses and organs failing,
that I dimly heard Mr Willie provide the shock
therapy I desperately needed when he shouted, "THE
OFFICIAL ESTIMATES ARE WRONG BY A FACTOR OF 10!!!"
My delicate Mogambo Sensory Alert System
(MSAS) detected something important and sinister
in that three-exclamation point punctuation! The
shock of the exclamation points, coupled with the
revelation that the total losses are going to be
at least 10 times as big as estimates project,
temporarily revived me by jolting me into a
Mindless Mogambo Episode Of Anger And Outrage
(MMEOAAO), supplying enough raw adrenaline
(fight-or-flight) and sheer will-to-live (so that
I could extract a terrible revenge).
But
before my heart could explode from the fear and
outrage, suddenly the world was a nicer place when
he said that all of this silly crap means that,
"GOLD WILL SKYROCKET WHEN THESE NUMBERS ARE
FINALLY REPORTED." Ahhh! I immediately felt
better! My heart rate slowed down, and I could
feel a smile trying to break through the grim
visage of my stony, angry face.
"Gold will
skyrocket," he says. I smiled again. A real one
this time. Ahhhh!
Richard
Daughty is general partner and COO for Smith
Consultant Group, serving the financial and
medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise
to heap disrespect on those who desperately
deserve it.
Republished with permission
from The Daily Reckoning.
Copyright 2008, The Daily
Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
