The Fabric of Society is Thinner Than You Think

A statement clearly backed up by the aftermath of Hurricane Katrina, and to a lesser extent (although the ramifications are really more far-reaching), the recent bailout of Bear Stearns by the Federal Reserve.

Now I know that Bernanke makes a solid point when he says that the fate of Bear Stearns is not a desirable one by any means. I agree. Nobody but the short-sellers have come out well in this situation. However, the apparent fact that our financial system turns out to be a confidence game and that the failure of one large broker/banker cannot be tolerated makes me think that I'm watching the Wizard of Oz, and the little man behind the curtain has just been exposed...

Don't misunderstand- I'm neither a doom-and-gloomer, nor a gold bug. I am convinced more than ever that the importance of diversification among several asset classes cannot be over-emphasized.