January 3, 2012
If you are one of my clients, you've heard that statement over and over again. I say it because the logic behind our central bank and apparently the ECB is just that.
I have truly grown weary of the nonsensical so-called "solutions" to the problems that ail both the US and European economies. Conceptually, this is the equivalent of taking out another credit card, in some cases with a higher interest rate, and using the proceeds from that debt to service your other debt. I need one of "best and brightest" to explain how this works in the long term.
If our policy makers really want to address these problems at their core, then make the institutions that hold this debt either write it down to where it's actually priced in the market and sell it, or put it on the balance sheet and accept that it's an asset they must publicly acknowledge they own.
Please do not tell me it cannot be sold because there is no market for it. What that means is what we all know: IT'S WORTHLESS. Hoping these asset values increase while hiding them from public view has been the modus operandi for too long for these institutions.
I learned a long time ago that "hope" is not a viable investment strategy; I'm pretty sure it's not viable economic policy either.
Doug Hendee, CFP(R)
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).