Wednesday, March 24, 2010

The Federal Reserve Needs To Do NO Homework On Bubbles.

The Vice Chair of the Federal Reserve recently said that the Fed needs to do homework on how to combat bubbles.

Here is a somewhat modest proposal of a suggestion: Why don't we outlaw the very human nature that causes bubbles to form?

Bubbles will, in all likelihood, always form. Rather than people crying about how terrible they are, why don't we embrace them? I don't understand why it is that the Fed would be able to detect a bubble, even with doing a ton of homework. After all, they are presently CAUSING the bubble in US Treasuries; not to mention the fact that they were a major contributor to the real estate bubble.

Why not leave bubble detection to the private sector, where shrewd capital allocators like Michael Burry, can profit from the crash, then re-allocate close to the bottom and make a killing for himself/herself and their investors? While I certainly won't say that I will be able to figure out much about the next/present bubble, I salivate at the idea of the Dow loosing a couple thousand points- stuff just ain't as cheap as it used to be!

I can't believe that I just posted a link to something Michael Burry related; it seems as if the value investing blogosphere has been trumpeting his praises for the past few weeks... The fact I did doesn't seem very contrary of me, now does it? ;)

BTW, I just noticed that I have been doing few investing posts as of late. As this is the case, I won't mention that Dick Cheney just endorsed Trey Grayson, and how Trey Grayson is so desperate that he is spinning the endorsement as if it is actually a good thing. :)

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