Shades of 1929

Some people get a little irritated when I make references to the great crash of 1929 because:

a) It is different this time
b) Something like that could never happen again
c) We are in a super bull market
d) Our economy is much different than in 1929

You can pick your own answer. I keep going back to 1929 because of all of the similarities. This morning Goldman Sachs announced that some wealthy individuals were going to pump in about 3 billion dollars into their failing funds in an effort to save them. It is a "great buying opportunity."

If you go back and read the history books, the exact same thing happened in 1929. The markets were getting into big trouble and a "pool" of investors would go in and buy tons of stock to prop up the stock market. Investors in the 20's would get a feeling of relief knowing that this group of wealthy individuals were pooling together to save the markets. It was the big name people back then and it is the big name investors this time around as well. Besides, what is a few billion among friends?

Now my favorite part of the press release about this influx of capital was the highlights from the Goldman letter sent to the clients (read: individuals losing a lot of money) into their funds. (read:ponzi schemes). Here is the excerpt:

....according to an Aug. 10 letter to clients from Clifford Asness, the firm's founder and managing principal. Asness blamed the losses on the "strategy getting too crowded,'' rather than the models not working.

In other words, it wasn't our fault that we invested all of your money into sub-prime debt. I would argue the model was terribly flawed from the start.

This is the problem with Wall Street, politicians, the Federal Reserve Board, _____ (fill in the blank) - No one will take responsibility for the irresponsibility that has taken place.