THE BIGGEST HEIST IN HISTORY

not so long ago, the biggest robbery in history was considered to have taken place at the boston museum in 1990, where thieves dressed as policemen took off with rembrandt paintings worth an estimated $300m, crudely cutting the invaluable canvasses from their frames.

then with american invaders approaching, it looks like saddam had his hand in the cookie jar, for amounts not verified today but possibly bigger than the first one.

whatever the case, nothing compares to what we have seen last month in financial centers of the developed world, in broad daylight.

for several years, bankers gave loans to people who could never pay them back, then packaged and sold those loans to investors, who put them on their balance sheets as high quality assets and claimed their companies were now worth more.

everyone got rich in the process, and when the house of cards came down last month, governments in the west were left with no choice but to spend hundreds of billions of dollars of taxpayer money to save these institutions, to prevent a complete melt-down of the world economy.

already now, this amounts to the largest transfer of wealth in history, from ordinary tax payers to wealthy bankers. many of these bankers have lost their jobs now, but not the sky high salaries and bonuses of the last 6 years. the trillions of dollars that will end up being spent saving these companies now unable to save themselves, should have been spent on education, social security, health care, clean energy research, better public transportation.

thomas friedman, writer of "the world is flat", lays it out in an excellent article in the new york times.

he also makes reference to a longer article which details the inner workings of wall street, called "the end of wall street's boom"

THE WORST IS YET TO COME

i've been quiet on this blog for almost 2 weeks, as i have been busy putting money into two funds, which seek leveraged returns inverse to the daily movement of the dow jones and emerging market stock indexes. in other words, if the market goes up, i lose money. if the market goes down, i make money. leveraged returns means that for 1 dollar invested, the fund will invest 1 dollar, and borrow 1 dollar which it also invests. this magnifies gains or losses, and my choice reflects my strong belief that share prices will be going much lower than where they are now.

you can follow their development here: ProFunds UltraShort Dow 30 and ProFunds UltraShort Emerging Markets.

meanwhile, an excellent opinion piece is published in forbes magazine by nouriel roubini, pretty much a checklist of the forces that will drive the markets down deeper.

IMF: SLOWDOWN BIGGER THAN EXPECTED

as predicted in my post of october 12, the imf revises its 2009 global outlook downwards, almost by a full percentage point, to 2.2% growth for the world, with a contraction of -0.7% in the u.s. and -0.5% in europe. business confidence indicators are plunging, and the new imf report speaks of "rapidly weakening prospects". what is remarkable is that the revision follows so soon after the initial forecast, and that it is so significant.

at the same time, even the imf seems to think that quick policy interventions are the answer to the crisis, and on its website it urges "countries to stimulate their economies in the face of a bigger-than-expected slowdown in the global economy".

apparently no one is bothering to look at the long term average of p/e ratios, discussed in my post of october 28. any government policies that will lead to a premature recovery of the stock markets will only result into an even bigger crash down the road. the last thing the world needs now, is another stimulus package that will once more inflate asset prices far beyond their true values.

profits are falling all over the place, and asset prices therefore must be allowed to follow suit. pretty much like going to the dentist - it is going to hurt, but what's the alternative?