Wednesday, September 17, 2008

China Syndrome

In October of 1987 I was in Guangzhou China for the once famous Canton Trade Fair. It was my first visit to China, I was on my own and the only contact I had with home was the regular sound of faxes being slipped under my hotel door throughout the night.

Early one morning I noticed seemingly everyone was agitatedly speaking on a mobile phone, still a rather rare occurance those days. Next I heard rumors that amounted to the end of the financial system as I knew it. London was plummeting, then New York, then Tokyo. Hundreds of points. I honestly wondered if anything would be left when I touched down in New York days later.

But there was.

This is a very difficult environment for investing and the I hear over and over we've never seen anything like this. What I've heard before. There is no question but that I overestimated ability of regulatory agencies and the markets to keep the genie in the bottle. The frozen credit markets are grinding the financial machinery to a halt in some cases. Additionally the value of assets on the books of various financial institutions is largely unknown. With Lehman assets bought by Barclays and AIG assets bought by the US government it is likely that the non transparent assets will be sold offered at any price until a market begins to function once more.

When this ends if an impossible question to answer.