Friday, October 3, 2008
Real Leaders Please Step Forward
Panic is not a good thing. Years ago, when I was with one of the five bank trust departments that I worked, we used to talk about the day when everybody would want to go through the “door” at the same time.
Markets are fragile. An orderly market has both buyers and sellers. The mix may vary from time to time, even within a matter of minutes, but as long as there are people bidding for an item, in this case a security, the market is functioning. The problem occurs when there is no one bidding.
Think of it as a beating heart. The top chambers are bidding and the bottom chambers are asking. If the top chambers stop working, you have a heart attack. It is just that fragile. Bidders or market makers put up the companies money to make a market in either bonds, stocks or even both. But, when there are no buyers, it becomes a workout market. In other words, the guy that on a good day will give you a bid on your securities now is only willing to facilitate a trade if he has a buyer committed at a specific price on the other side of the trade. In the early 1980’s, I had to work out municipal bonds in just such a market.
This rescue/bailout piece of legislation will go a long way towards taking the pressure off everyone wanting to go through the “door” at the same time. We need to rebuild the confidence in the market. In fact, we need to rebuild the confidence in several markets around the world. This is no longer just an American problem, this is a world wide problem. We may think we live on this planet in our jeans and t-shirts by ourselves, but we don’t. The financial markets circle the globe and they keep “beating” just like a heart does continuously. The time for America to show leadership is now. If we want the rest of the world to respect us when we chant “U” “S” “A”, we had better start with chanting it quietly to ourselves. This is no time for a weak heart. Those that can lead will lead and those that can’t should get out of the way. The rest of the world is looking to us to deal with our current financial problems now. Will the real leaders please step forward.