Lessons To Be Learned While Countrywide-Hating

Do you remember when we used to party like it was 1999? That was 1999. And then 2000 came, and the stock markets took a digger. A bunch of people lost a bunch of cash, and everyone freaked out about how crazy and dangerous the markets were. Just months earlier, everyone thought they could quit their job to make a fortune day-trading shares of BBQ.com, and other great business latest and greatest IPOs. It was easy while it was easy, and then, the bubble burst.

But what happened after a little time passed? Everyone looked back and said things like "should have seen it coming" and "that was unsustainable growth - had to correct at some point". And this is always what happens in a market cycle. It booms, it busts, and you want to be there while it's booming or your neighbor is going to drive a nicer car than you - and we don't like that. If you are tired of my references to Kindleberger's Manias Panics & Crashes, skip ahead to the next paragraph. Otherwise, please note that the author walks the reader through the common traits of all history's asset bubbles, and many of his lessons are being learned - again - by today's housing market participants. To understand the psychology that drives a market to extremes, he cites a South Sea stock investor in 1720 who said, "When the rest of the world are mad, we must imitate to some measure.", and he generalizes that "There is nothing so disturbing to one's well-being and judgment as to see a friend get rich." No wonder... its in our nature. Monkey see, monkey do. Read it now to put today's market in context with history - and to give peace with the idea that we have seen it all before, and things will get worked out.

Moving along... one of the typical components a market de-bubbling is the scapegoating. Heads need to roll, somebody needs to take the fall, etc. Its formula. And rightfully, there needs to be an understanding of the players involved in creating the bubble. But don't join the witch hunt this time, because chances are you had a piece of the action this go around. I am not going to dispute any of the accused in Barry Ritholtz's list which includes: The Federal Reserve, Borrowers, Mortgage Brokers, Appraisers, Federal Government, Fannie Mae, Lending Banks, Wall Street firms, CDO Managers, Credit Agencies (Moody's, S&P), Hedge Funds and Institutional Investors. Read his paper for elaboration on each participant.

An interesting article came out on 8/26 in The New York Times specifically flinging mud at one of the mortgage players, "America's number one lender", Countrywide. From reading it, it seems some disgruntled ex-employees ran to the press in an effort to expose some of the more eye-popping sales realities of the firm. And if this article is accurate, it would represent a disappointingly low standard of professionalism for an atmosphere where business of a financial nature is to be conducted. But who knows... the media is going to push this kind of sensational stuff to build on the souring momentum of everything connected to this phase of the market.

Keep things in perspective. Stay calm. Great time to read a book.