From Superb-Mindset & Superb-Momentum to Superb-Metamorphosis: I start off by addressing the issue of “Superb Metamorphosis” by exploring the various theories and practices associated with the easing model. My intent is to examine how effective the model’s design is and whether we have realistic expectations of its effectiveness over time. Is the perceived worry to the “exit strategy” rational?
Some of us view the easing model as a transition strategy of limited duration, while others see a long term need for interventions designed to achieve a sustained recovery. Although, time limited interventions are likely to lead to limited results and might require a very long-sustained effort. And although achieving apparent success now, is no guarantee that the results and changes will be sustained after the exit or else, taper. With that said, this multi-year time horizon is generally accepted as a long enough time to achieve its objectives.
The widely held worry of the exit strategy is that it might be harmful, but to me, not as harmful, as the continuous intervention, with no real impact. Interventions in markets can do more than simply leave markets unchanged. Changes could result to outcomes that are counter to intended goals. Intervention in markets can result in harm that may delay a dynamic recovery.
The expectation that the intervention will have the same impact today as it did a few years back, to me, is unrealistic. If an intervention improved the market in past years, the same forces may undo the work now. The same interventions that positively transformed markets yesterday might un-transform or cause negative changes today.
Interest Rates will stay low, just like coming out of the 1930's. Look at all the 30 year corporate bonds paying very low rates to holders. Union Pacific or Norfolk southern are prime examples. Look at their 1930's bonds none paid over 4% and stayed that way into the 1970's. Nixon and Obama are the same guys different days.
Watch Obama fail just like Nixon when he puts wage and price controlls on the Gougers. Down he comes. It is just that fee simple if you read Rothchilds history at all.
I don’t disagree, but whatever your thought about the politics of Obama is, I think no one can deny the economic uncertainty in which he had to make economic decisions in. And the economic circumstances are not like ever before. There are now great deviations between the expectations about the economy and the reality of it. Whatever economic variable he started targeting, it immediately lost its value as an economic indicator. As an example, his administration’s policies in reviving the housing market are successful but they are no longer a measure of overall economic health….
continued….although I know that the reality of an exit strategy may differ widely from theory. Our recent experience with the market’s reaction, have often been cited as reasons for not exiting.
I know that the idea of maintaining the positive market effects and desired operations in markets after exiting, might seem unachievable. But however idiotic or stupid my view may appear, I don’t think the recent market reaction is due to the exit strategy.
The market participants know that an exit strategy today, is an elegant construct—intervene strategically in a market over a finite period to make a long-lasting structural change in the market. The appeal of creating programs with a finite life is great in an era when the central government is being accommodative and the private sector becoming more self-efficient.
After note: As I coin the phrase “Superb Metamorphosis”, I think the term is self-explanatory but it might still seem vague. Some might not understand the link to this company’s board. Here is my definition which might help newbies view it more than just “nonsense.”
Superb Metamorphosis is recognizing the power of market forces to transform. It is not concerned as much with the short-term economic consequences, as it is concerned with the long term outcomes resulting from various strategies used in the financial world. I look at how financial markets and firms innovate. The degree of change sought and the motivations for the change; the concept fits well within the current trend in financial markets towards the “easing model” and its “exit strategy” of restructuring and personnel changes in order to withstand the increased competition.