Industry

Life imitates art in credit mess

Author
Marc Davison
No.
53
Date
08/18/07

In the
movie Pulp Fiction, hit man Vincent
escorts his boss’s wife, Mia, around town. While Vincent is in the bathroom,
Mia discovers his stash. She thinks it’s cocaine and promptly snorts some. Bad
idea – it’s actually high-octane heroin. Vincent returns to find her writhing on
the floor uncontrollably, nearing cardiac arrest.

Enter
Lance, Vincent’s dealer. He hands Vincent a railroad-spike-sized syringe to
bring Mia back to life. Here’s the scene:

Lance
OK, you’re giving her an injection of adrenaline
straight to her heart. But she’s got breastplates. You’ve gotta pierce through
that. So what you gotta do is, you gotta bring the needle down in a stabbing
motion. [Makes 3 stabbing motions] 

Vincent
I gotta stab her three times?

 Lance
No, you don’t gotta fucking stab her three
times! You gotta stab her once, but it’s gotta be hard enough to get through
her breastplate into her heart, all right? And then once you do that, you press
down on the plunger.

 Vincent
OK, then what happens?

Lance
I’m curious about that myself.

Vincent
does as instructed. Mia immediately bolts upright, eyes wide open. Apparently
fully recovered.

Life imitates art

On
Friday, world markets, pundits, consumers, and real estate professionals were
borderline comatose, in cardiac arrest – the result of a high octane overdose
of the credit market crisis. Enter the United State Federal Reserve with a
space needle like syringe to plunge $120 billon of pure adrenaline liquidity
through the breastplate and into the heart of the banking system.

Global
markets bolt upright. The FTSE Eurofirst 300 index rallies, ending Friday 2.4%
higher and clearing all its losses for the week. In London, the FTSE 100 bolts up 0.4% on the
week.The
S&P 500 index surged 1.82%.

Like Mia,
the markets bounced back. But the underlying problem remains.

Analyst
Hugh Whelan put it like this; “If you’re a leveraged financial institution, a
leveraged individual, a leveraged hedge fund, on Monday when you walk in,
you’re still facing the same stresses you faced today and yesterday."

The
American consumer, long addicted to purchasing on credit, reached for cocaine
homes blind to the dangers the high octane debt heroin they were sold from the
many Lance’s in the mortgage and real estate sectors.

A
catastrophe.
A
paralyzing blow.
An epic
crash.

It
finally caught up. It’s a problem that requires massive intervention.

The price of addiction

None of
us can discount the realities that face us. Foreclosures continue to rise.
Rates continue to rise. ARMs continue to reset.

But
there’s hope.

While
driving out for coffee this morning, I passed an open house. A couple was
entering as another appeared to be leaving. I slowed down to observe. The
couple leaving stopped, turned, and began pointing around the front yard.

They seemed
like ordinary, everyday buyers. And I think:

Homes are
going to continue to sell.
Buyers
are going to continue to buy.
Agents are
going to continue working.
And money
will continue to be lent.

There
will just be fewer Vinces, Mias and Lances.

 – Davison