Jim Letourneau's Blog

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Bill Cara Blasts Paulson

One of Canada's best financial bloggers is Bill Cara. He is both passionate and prolific. His recent post illustrates an understanding of the markets that few have.

Without credit, the economy hits the wall. When that happens, everybody – consumers and business owners and managers alike -- hold on to the cash they have. In the market, there are fewer bids. Liquidity dries up, bid prices drop and traders who have debts to service are forced to dump stock at ridiculously low prices.

He goes on to say...

I think the cash being set up on the sidelines is mostly in the hands of Paulson’s friends – Wall Streeters, private equity firms, wealthy capitalists like Warren Buffett, and so forth. The rest of the people are being squeezed, so the cash they hold, while large, is still a pittance to the sums held by the rich and powerful.

Large piles of sideline cash is just waiting to pick off bargains.