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Love Letters to the Troubled Financial Markets
Letter No. 1: From a mortgage payer to the subprime mortgage market Dear Suprima, my sweet little Subprime Mortgage, We had such a wonderful low-rate mortgage affair going for more than three years. Can we re-capture the magic? You helped me to understand my inner spendthrift. I helped you to make money for mortgage lenders, Wall St. bankers, rating agencies and investors. Did we have to stop? There's such an empty feeling in my heart now that you're gone. And there's such an empty feeling in the financial markets as well. Without our love affair - you the provider and me the consumer - the U.S. economy has fallen on hard times. Without our court and spark, Wall Street investment banks are taking hits to their balance sheets. Without our mutual dependence, the rest of the world is holding its breath, wondering if U.S. consumers can keep on spending. Won't you take me back and let me live in that brand new house that we bought together? Your loving Mort, the mortgage holder Letter No. 2: From the U.S. economy to the Federal Reserve Dear Feddie, my one and only Federal Reserve, Our honeymoon was so short and sweet. You gave me everything I wanted: more transparency both in nightgowns and financial dealings, more easy credit and even more cash in our bank. But now that I know you better, I worry that you may be too indulgent and give me more than I need. I don't really need more things. What I really need is to be able to trust. I want to trust that I will have a job tomorrow. I want to trust that our currency will hold its value. I want to trust that we can take the bitter medicine together that will make our finances stronger. Have you been under some stress thanks to our new marriage? I've noticed a certain reluctance at night that might be explained by an article I just read in the February issue of The Elliott Wave Financial Forecast: "To see the ultimate impotence of the Fed, we need to go back only [two months]. In December, the Fed set up its Term Auction Facility, a series of four $30 billion auctions in which central banks essentially gave banks free passes to make money through arbitrage in the LIBOR market and elsewhere... [I]ntroduction of the auction plan was quickly followed by a Dow plunge from 13, 700 to 12,660," the close on January 31. And Elliott Wave International's Bob Prechter says that the reason this resistance is happening now is because social mood has become more pessimistic, so people and institutions aren't responding to your blandishments and your credit easing the way they used to. In his December 2007 Elliott Wave Theorist, he wrote: "The outcome is predicated on psychology. If [the next leg] of the bear market has begun, nothing the Fed does will engender confidence. On the contrary, everything it does will be interpreted, in the trends toward negative social mood, as something bad. The Fed's failures will not create fear; fear will create the Fed's failures." Oh, honey, that sounds depressing. Can our future seem so shaky? I pray that you and I have not harmed our relationship, because I don't do well when I'm depressed. Your loving "Connie," the U.S. economy Letter No. 3: From a cardholder to a credit card company My dearest CiCi, the best credit card company I ever had, What have I done to make you forsake me? For years, I did what you wanted by running up the bills and paying only the minimum due amount. For years, I let you charge me exorbitantly higher interest when I forgot to send my monthly payment. For years, I threw caution to the winds and kept spending on credit even when I knew I couldn't pay you off. But now you turn your back on me. You send me cold letters with fine print that say you are going to lower my credit limit and charge me higher interest. Was it because I dallied with other lower-interest cards? Or is it something bigger? Have you decided that with all my debt and my tapped-out home equity line that I'm no longer valuable to you? Please don't turn your back on me. I can't live without you! Holden, your loving cardholder, who once could do no wrong and to whom you sent mailings galore promising more credit at lower rates Letter No. 4: From a shareholder to the bull market My sweet baby, Bull Market, You have always been so strong, and your strength drew me to you. Now, I can't bear to see you weakening and drawing away from me. We've had such good times together since 2002 when I finally left Tex Stocks who had been abusing my trust. Now, there are as many days when your mood is down as when you are ebullient. Is it something I did? Don't you want me to invest in your stocks anymore? I miss our old carefree runs up the Street. We had so many friends and admirers. Now, I see more people visiting our volatile friend Vix to buy puts as if they think our relationship is falling apart. Please stop your boorish (or is it bearish?) behavior and come back to me. I will never stop believing in you. Shari, your darling shareholder Letter No. 5: From a U.S. consumer to the oil industry Dear Derrick, oilman of my heart, I'm not sure I have the energy to keep up our relationship any longer. I have always been so dependent on you to supply me with the oil and gas that I need to drive my car and heat my house. But now I see that you have been taking advantage of my reliance on you. You keep making me fork over more of my paycheck while your own finances improve. If you will only ease up, I will stop embracing ethanol, give up trying to charm Hugo Chavez and forget about tilting at windmills. It's really your oily embrace I crave. If only I could afford you! Your Sweet and Utterly Voluptuous SUV Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. A graduate of Stanford University, she has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter at the Federal Reserve Bank of Atlanta. |
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Hardly anyone writes about the after-effects of Valentine's Day once the empty box of chocolates and the drooping roses have been thrown out in the trash. But not every romance - or financial dealing - works out for the best. This week, I found some left-over love letters that didn't get delivered to the financial markets in February. They give a sense of how the U.S. economy is like a romance gone bad - so much promise at the beginning of the romance now turned to cries of disbelief and pain at abrupt endings.