Monday, March 16, 2009

Three Card Monte

The game of three card monte, is a confidence game in which the victim, or mark, is tricked into betting a sum of money that they can find the money card, for example the king of hearts, among three face-down playing cards.

In a bastardization of the traditional game, say I were to give 3 players a card, and if they won, I'd give them five more cards, and if they won that, I'd give them double the amount of money they bet. Then I asked each how much they wanted to bet. Suppose the first player elects to bet $100, the second player elects to bet $50, and the third player elects to bet $0. Traditionally, logic might tell you the guy betting zero cannot possibly win because he didn't bet anything, and as any avid poker player knows, you can't win what you don't put in the middle. However, we would argue the opposite, because how could anyone ever possibly win a game in which the rules are not clear AND they change as you go?

Of course that question is rhetorical, but its exactly the situation U.S. citizens, and investors alike, find themselves currently in. The U.S. government, both under the Bush & Obama administrations, or to be more direct, under Treasury Secretaries Paulson and Geithner, are the hustlers and we, the public, are the collective "mark." How else can you explain the hilariously sad hearings for the big three auto companies a few months ago? After weeks of hearings in which executives were ridiculed for asking for billions in bailout funds while travelling in corporate jets to the meetings, Congress all but denied Ford, Chrysler and GM their request...until Paulson changed the rules 12 hours later. This blog will not speculate as to the photos Mr. Paulson may or may not have of Harry Reid and Nancy Pelosi, or whether he passed them on as a rite of passage to Tim Geithner.

That being said, the supposed bailout monies have changed intended recipients more times than Sarah Palin has shot moose from a helicopter with a high powered rifle (a lot). First, it was supposed to go to the failing investment banks, then to AIG, then to commercial banks with regulations, then to commercial banks with little regulation, then to the auto industry, then to homeowners (even though nobody has identified which homeowners), and now maybe back to the auto industry again. Its dizzying.

The effect? Investors don't know the rules of the game, and so money continues to sit on the sidelines and wait. Have you put money in an S&P index fund lately? Didn't think so. Point proven. In fact the only people investing these days seem to be hedge funds, and thats only because they have to do something by their very nature. They are the equivalent of a gamble-a-holic in this sheisty casino we are all in.

But if we are all playing a game of three card monte, exactly what are the three cards being used against us?

On Wednesday, we will examine what the three cards being used in this game are in detail. Stay tuned...

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