Money-making will start now with touch of skepticism

COMMENTARY

It’s not too early to think about New Year’s resolutions.

Maybe we can have a national one this year, one that we could all adopt. How about: In 2009, I will be more skeptical.

It would be especially good if we were all more suspicious about what we hear from everyone even remotely connected to Wall Street: bankers, brokers, financial advisers, economists and all manner of investors, from institutional money managers to hedge-fund honchos, the whole bunch. Unlike pledges to lose the pounds and keep them off, I’m optimistic that this is one we can all keep, for 2009 and perhaps for 2010, as well.

How long did it take for people to get over the Great Depression, after all? Was it 20 years? Thirty years? Fifty years? I had lunch with my father the other day. He’s 84, and he still doesn’t believe in credit cards.

The important thing to remember in the current crisis is that we still haven’t seen the worst of it. We saw the credit markets freeze up, not once but twice, if you count the meltdown of the auction-rate securities market earlier this year.

We also saw our retirement savings evaporate as the stock market collapsed, if only for a while. We still haven’t seen house prices hit bottom, and big layoffs are just beginning.

Worst-case scenario

On my own beat, I keep thinking about all the public officials who were pitched swaps and derivative deals and investments by bankers. The officials couldn’t understand them. It looks like the bankers who were selling them couldn’t quite understand them, either. The real clincher, though, is that while selling these things to states and municipalities, a lot of the salesmen told the public officials not to worry, that for them to lose money, basically, the world would have to end.

Well, guess what? The world, for a lot of these kinds of deals, be they variable-rate debt coupled with interest-rate swaps or the purchase of collateralized debt obligations, ended. Things the salesmen said could never happen, or could only happen once in a hundred years, have happened.

I used to like looking through the feasibility studies that accompanied high-yield municipal bond issues. I always used to like going through the various cases the experts set up, and pointing out how lame their worst-case scenarios were. I don’t think any scenario is off the table now. If you’re even a little skeptical, you have to ask, “Ok, what happens if this, this, this, and this all happen at the same time?’’ No sale.

(Joe Mysak is a Bloomberg News columnist.)