Recently, Bill Gates of Microsoft appeared before Congress asking for an increase in H1 visas to support the growth of the Information Technology sector.
Presently, the San Francisco Chronicle online edition is running recruitment ads for professionals in Alberta, Canada. Since the ads are running in the Bay Area, it’s probably safe to say that professionals in the info tech, and bio/med tech industries are being targetted.
Now… we bring an H1 visa worker to work in the USA for 2-3 years, and give him/her a glimpse of our newest technology, and then send him/her home. Granted, they will pay taxes on their earnings while they are here.
On the other hand , the USA based professionals responding to the lure of Alberta, Canada not only would leave a void in our corporate ranks (which Mr. Gates is seeking to fill with H1 visa workers), but the taxes that these professionals would be expected to pay throughout their careers would also be lost… as well as, any discoveries or breakthroughs that they might generate as a result of their work.
From an individual perspective, the professionals making the move to Canada would avail themselves and their families of a least costly health/medical system; while avoiding the added future tax burden the U.S. taxpayer will have to assume as a result of the financial/mortgage crisis.
Perhaps the collateral damage brought about by the financial/mortgage crisis presents a potentially bigger threat to our economy, and shares prices and their performance than anticipated.
The house bubble caused the current financial problem. The wrong foreign policy contributed to the current high oil price hence the inflation. Both problems bring down the value of Dollar. It is the people who created the bubble and who make the government policy that caused the problems. It is stupid to believe “market will solve its problem”. Market is the result not the cause. Hence Fed is doing the right thing trying to reduce the damage of the bubble. It is the time for government to do something to fight the oil price and inflation. For example, sparing the would-be-wasted money in the war (the war is not a waste!) to fight with the oil producers and speculators.
Well, I think to stop the whole market from falling apart, the borrowers should not be allowed to bankrupt during this crisis. They must be responsible for their mortgage debt and no one should be paying for them. Then the matter will settle.
A major cause of the economic malaise include the so-called “war on terror.” While petro was poised to go up anyway, it is Bush’s war that has drained our coffers. We are at the mercy of China and Japan, and if I were they, I would be looking for somewhere to put my yen and renminbi that would earn me a better return.
We’ve had eight years of making nice to US corporations without even a backward glance at the wage slaves. Americans work hard and are abandoned. And if the government were serious about being the champion of the multitude of Amricans, we would be protecting our borders, rewarding good personal financial behavior–like SAVING, and spending our tax dollars on our own infrastructure, education, and national healthcare. WE NEED SOME GOOD JOBS INSIDE OUR BORDERS and MACRO CHANGES. Fund the NSF for starters. Reward innovation and invention, not just clever marketing of junk and techno-one-upsmanship. US companies are used to profiting from gimmicks. We need more efficient transportation, alternative energy, basic research, and user-friendly essential technology. Imagine the result of cost-effective desalinization. If you want to help corps, free them from being the middlemen in healthcare. Changing trade agreements won’t help us until we are innovative and cost-effective.
Keep your money in the mattress until we see if the election yields any discernable change in direction. Why am I not optimistic?
I follow the nice, traditional piece of advice: “the trend is your friend”. The trend is down for the important moving averages.
I’m long in energy, gold, and the euro. I’m short on the S&P.
The worst is not over for U.S stocks, especially financial stocks, but its surely near bottom, I wish your Fed would stop handing out free money into a bottomless pit and let the market forces eat their weaker brethren. A weak U.S dollar may be good for the domestic economy, it means that exports will increase, which is better for U.S workers, but as long as world wide Oil is traded in U.S dollars there will be no depression. A recession definitely, as people realign their spending habits to the economy.
You people have never let this get you down before, down start now.
things will not get better until we stop driving are economy by consumer spending and export more , than we import. remember when we sold cars all over the world, that was bulilt in the usa. im guessing S & P bottom at 1100, when the housing becomes affordable
“Free market”…? Greenspan was a big believer in Ann Rand’s theory of free markets… Yet every time things went south, he injected “help”.
It’s now time to pay the piper!
I feel sorry for all those caught up in the mortgage nightmare, but this will force you to read ALL contracts before you sign them & if you don’t understand what your signing…DON’T sign IT!!!!
Dollar cost averaging is mainly intended to ease newcomers’ fear of loss; as a strategy it tends to have lower returns and doesn’t meaningfully return risk. If you don’t have the ability to play a bear market it’s generally better to sit things out in cash or short-term Treasuries.
To those that think the Fed can simply print money: it doesn’t work that easily. If the government tries to print its way out interest rates would skyrocket (and completely crush what’s left of the housing market). Ben knows this, which is why he has stuck to short term loans. The only option the Fed has that doesn’t end in total disaster is to force the banks to take their losses. That’s not going to be fun for the economy either, but the damage has already been done.
It is obviously too early to tell whether Tuesday marked a bottom. Monday took out bear market lows in the NASDAQ and Russel 2000. For the other averages, closing lows were taken out. However, not intra day lows.
Had Tuesday’s rally happened without the aid of Fed aid to the financials, I would be more optimistic. Since August, the Fed has come to the rescue several times, resulting in big reversals that have failed to stem the tide. It remains to be seen whether this one will be any different.
I got caught in the sucker’s rally. I was doing allright with my TSP funds in the safety of the “G” Fund which returns 5% and protects your principal, but after the big run-up yesterday, I decided to move back into the more agressive Lifecycle 2030 Fund. After watching the market pull back and fall today, I feel like a stupid fool. What was I thinking. I’m going back to the G Fund and I will stay there for the rest of the year. What an awful market we are in now. Both markets are treacherous, housing and stocks. There is no hiding place in today investment market. Investor beware!!!!!
did you ever notice,
everytime there is something wrong with the stock market, they somehow find millions, an millions of dollars to shoot up a rocket to space? Dont you think they could use that money for the future retirement system,
or our current housing problems back here on earth? I think its all related to the white house somehow,
you just have to “follow the money”
and see where all the money goes everytime they do that, and its all linked to the white house also.
The bear is among us. He has yet to awaken fully, but awake fully he will. There is more downside to come with the Financial Stocks. It will spread to the others.
I think it’s humorous that a florida realtor and a california home owner feel compelled to teach us lessons in economics. Don’t ever forget what caused the sub-prime melt down. Greedy realtors shoveling over priced housing down stupid housing investors throats, with california, vegas and phoenix leading the charge.
Don’t worry though, the rest of the country will cover your tracks and absorb the recession caused by your brilliant acts.
Realtors deserve a special place in hell, right next to ambulance chasing lawyers and dead beat fathers.
The markets lows will be tested once again and bailed out by the fed once again as well. We are gearing up for a two year rally before we cap off again. Buy low, buy cheap, and position yourself for the run.
The basics are against us. Home equity continues to plummet, refinance loans are harder to qualify for as a result, so more and more homes will end up in foreclosure. This has really hammered consumer’s ability to spend money. How can anyone say when this nightmare will be over. Hold on to your hats, this will be a very bumpy ride!
Paul, this is a nice article. It may or may not be the bottom, but you are sensible to sound the alarm that investors may be trying to “catch the falling knife” with bank stocks. Keep up the good work.
VI:
I know another Texan who suffers from “irrational exuberance” as well. But fortunately, he’s retiring next January – and not a day too soon!
The DJIA was flat today and treasury prices rebounded a bit. Could the $200 billion bail out already have petered out? Let’s see where things are a month from now, ok?
Just another sucker… but one who’s not a lap dog of the positive, feel good, school of economics.
The nations constituents understand our economy is due for some reform. However, even on a good day, such as the Dow doing its best in five years, these writers always make the reader feel wary. Why can’t CNN editors write something positive? Markets are cyclical. Downs must occur every now and then for expansion to happen. This is introductory economics.
The dollar is in the tank. No one wants dollars. That says it all. In 12 months, we will witness the greatest recession since the Great Depression. Inflation will be sky high, and the dollar will be virtually worthless.
The people who are going to make money will short financials and short all equities relying on the consumer economy, go long on market pessimism and long on goods that satisfy basic needs, and avoid investing in all things Muslim. This will hold true until June or July, when the market may or may not recover from a lower set-point. Then the whole process will kick back into gear in the winter, and cycle again, over and over.
In spite of temporary recoveries, the net trend will be for a downward American market for years until we evolve away from the consumer economy. This has been predicted, for the most part, by Leeb.
The American economy cannot survive any longer in the pattern it’s held to since the 1970’s, based on Americans spending most of their money on shoddy stuff that doesn’t satisfy any basic need, and borrowing money at credit card rates to do it.
People used to borrow money they could afford to pay back at reasoable rates. Finance companies and banks will have to go back to that kind of low margin business and give up the “free money from credit card rates” that has deluded them into thinking they could write mortgage agreements with loser borrowers whose only qualifications involve eligibility for affirmative action.
Because our underlying approach to foreign relations is based on “dollar diplomacy”, and “dollar diplomacy” requires frivolous American consumer spending that cannot be sustained, we’ll have to go to a different foreign policy approach. That will involve a painful transition domestically, because politician-lawyers have built careers and fortunes on the status quo, but everyone else will benefit when they either adjust or get crushed.
The effect of a foreign policy change abroad will be very advantageous, especially in the face of the global Islamo-fascist oil extortion gambit, because foreign countries will be able to understand an American foreign policy that only states: “Get along, and we’ll be nice. Give us a hard time, and we’ll blow up your military assets before you can hurt us.”
Foreign policies have to make sense to the people on the receiving end, and that’s the sort of policy anybody can understand. It’ll be particularly effective in the Middle East and Central Asia, and should tighten things up nicely in Australasia and Chindia.
When we stop rewarding our enemies with gifts of food and money and materials and weapons, and stop taxing Americans to pay for all that foolishness, things will become better and make sense again.
Disclosure: The author is long on precious metals and copper and commercial fertilizers and international coal, mixed on basic materials, and short on NASDAC. The author has locked in his positions for the most part, and is generally just watching things cook on the stove for a while.
So what really just took place was like the savings and loan mess of years gone by,(remember keating 5 McCain),is that the US Tax payer just bought a lot of bad paper for subprime loans.
For shame fed bank.
The money printing presses must be smoking they are working so hard.
No, there is still a much greater darkness yet to fall in the financials. The worst is not over. I am not fooled.
Hey VI
Last week it was reported that Dallas had 100,000 plus new jobs thus proving that America is NOT on an economic slide.
You can’t have it both ways – Spitzer tried and now he is unemployed. Either things are good and getting better OR things are not so good and are going to get worse.
If things are so perfect, why is the Fed doing what it is doing? Are they bored? Or are they sticking their fingers in the dike?
I like my job, but I’d rather be the manager of a hedge fund. I take zillions of dollars from people – invest it in high risk instruments, pay myself an insane amount of money – then when the bills come due – walk away and let the Fed’s bail out the fund. I cashed my paychecks and bought Euros.
I can only wonder what the initials “VI” stand for – Village Intellectual ?
However, I am hoping from the bottom of my heart – that you are right.
Unfortunately, reality says “YIKES”
Did anyone hear a “meow” ??? Enjoy the bounce, but always be careful trying to catch a falling knife.
Wow,, i was correct…this is really a mess…i’m a Realtor in Florida, i’ve got 35yrs of experience selling & buying…this is my first time reading this “blog”…i can tell you folks are “SEASONED” financial veterans…and for the most part 98% of you are right on the money about the markets…i agree,,let “it” collapse…it will anyway…let it correct by itself, isn’t that capitalism in it’s purest form ? i’m tired of these slick bankers and politicians helping each other—where is the Common Sense ? Seems the MBA’s just don’t understand anymore ¿ Ok, so i’m cynical,, Ooooops, can’t use that word, must think positive—Anywhooo,,thanks for the interesting read,,makes sense to me–
The Fed found $200 billion partyl from the capital losses on the Google debacle from $750 to $400 today.. Wall Street tricked investors into buying Google shares only to trap them with captial losses for years to come…
Just stop contributing to 401K and IRA accounts ans see which stocks Wall Street would run to protect the most… due to dwindling inflows by declining contributions…
The most important contribution for everyone is their home mortgage… dont do both if you cant afford both.. Who knows what will happen three years down the road… Remember you cant touch 401K or IRA money until you are 59 years old… It is a long term illiquid account to avoid if necessary… Home mortgages is the safest accounts to keep contributing… Forget Wall Street and Washington DC beltway axis evil empire…. Stopping contributing may help end Iraq War, who knows….We will get bigger returns by stopping contributing to 401K and IRAs in form of better home prices… Wall Street is slick and filthy…
Healthy fear is not panic, what is happening now is nothing but a panic gone nuts. Panic only leads to a black hole. True things in the future look bleak, but if we can have a little time to get our houses in order – this would be a blessing, don’t scream the sky is falling until it really is
Obviously you do not understand economics! The market needed to test its low yesterday and it did and did not break through. Only a SUCKER would not see this as GOOD NEWS! Last week it was reported that Dallas had 100,000 plus new jobs thus proving that America is NOT on an economic slide downward. WHAT THE FED DID WAS BRILLANT and this gave us a window of time to get our economic footing back again! ALL of you out there who like your jobs and want to keep them ought to throw Bernanke a kiss and LaMonica and thumbs DOWN! It is time for the REAL ECONOMISTS to have a NEW VOICE in this matter and for the PSYCHOLOGISTS to accept defeat! As my grandmother said “I DELCARE- there is still life in the economy!”
There is no place to run or hide. Stocks are in the tank, because we as a nation are not producing enough to back up the value. This is in no small measure because our taxes are too high and our laws are too complex. We shrunk our own pie by creating this hostile environment that drives businesses we’re good at overseas. Our currency is weakening because the fed is printing too much money. Slicing the pie into more pieces does not increase the amount of pie. The Fed can arbitratily lower short term rates to encourage business to borrow, but it won’t be long before long bonds recognize the inflation this will create and prices tank there too. So what’s left? Money market funds that will pay 18%? We tried that in the 70’s and that didn’t work either. There is still no “free lunch” folks. We’d better think straight and simplify or be left in the dust by other countries who do. Anything that is as complicated as the crap we call accounting rules just can’t be right. And when the tax cuts expire, the hammer will fall. Get it?
I just love the people who say “stop spreading fear”. Fear is only bad if there is no danger. Confidence wont keep a confidence scam going forever. No positive thoughts will keep a bridge standing if the math doesn’t add up. Fear of real danger is healthy. Pointing out real danger to your neighbors when they have an irrational refusal to see reality is appropriate. I believe it is only those playing the confidence game who call acknowledging what is happening “fear mongering”.
It’s all fodder for the big players. The rest of us are along for the ride and hope that we get some scraps.
oH BOY Good news La Monica is back! The psychology major, just cann’t handle that he just might not have more bad news to throw up on us in the future. Now lets see – the sucker just has to suck out good news – poor guy
The market reacts to stimulus whether it be sound as in (well there really is little, it’s all a guess), or emotional as in the media. Warren B and his lot will get out ahead and even drive some of the panic. They have the money to play and this is what they do. The rest of us depend on money managers, who no no more than we do and do not have a personal investment or TV pundits (media). Are right or wrong? Yes and No and No and Yes. The market is fickle, how long can you hold out and by that I mean stay in and not give up. I’ve been told that the best strategy in this market is to play for the long term. Those looking a 40 years are going to do OK. The rest of us who have at most 20 (were seniors) can only hold our breath and try to puck the dung from the crap. I for one am not excited about a 416 point gain. Especially after a 2000 point drop.
What’s $200 billion compared to a $3 trillion dollar problem? Not to mention the $200 billion is only good for 28 days. More melt down is sure to come, this is just the first inning of an extra inning game. Watch for a major bank failure and a government bailout to follow. Remember the S&L crisis anyone? That pails in comparison to this problem.
Two bankers decide to go for a walk in the park. “but what happens if we fall over and hurt ourselves?” says one.
“Don’t worry” says the other ” the fed has plenty of band aids”
so they go for a walk in the park and as fate would have it, fall over and hurt themselves.. badly!
“Help us fed, Help” they cry… but alas, the fed are nowhere to be found and the two bankers bleed out and perish.
Their remains are used as fertiliser to raise the next generation of bankers who think financial responsibility is a “walk in the park”.
The banks and finance groups of the USA remind me of a child who, not having learnt to walk properly, keeps falling over… and the fed is the parent rushing to their aid with bandages… but what happens when the fed runs out of bandages?
perhaps the banks need to crawl for a while, rather than kidding themselves into thinking they are ready to walk ?
Technically speaking, the DJIA broke a triple bottom when it tested and closed below the 12,000 level for the third time this week. Next support is at the 11,000 – 10,800 level.
The worst is not over but I believe this is a good time to accumulate financial stocks. Think of it this way – if the major banks collapsed, so would America. Do you think the Fed and the Whilte House will allow that to happen? The outgoing administration is worried about its legacy, while the incoming administration would be so keen to get the economy moving again.
This is a temporary stop on a long term bear market. The trillions of dollars worth of realestate wealth lost in the past year is not coming back any time soon. This will continue to have a controlling influence on the spending habits of americans for years to come. In addition, a lot of Baby Boomers have not saved enough for retirement. They can no longer count on their 401k and realestate equity to save them. Therefore, they will increase their savings rate instead of buying more stuff they may not really need. Most state governments are broke, with an infrastructure in need of major overhaul. Government employees, employee pensions and other spending are keeping realestate taxes high.
In my opinion, the drop of the stock market, which started last year, is just the beginning of a long term process (10 years?). No infusion of paper money will be able to revive the american consumer because that consumer is and will continue to be concerned about their retirement survival.
I won’t even get into the whole world economy thing, as most americans have no idea how much the changes throughout the world may have already permanently changed their lives.
Unfortunately, the 21st century belongs to the Asian countries. The current economic woes will not end until the US deals with the multi trillion dollar debt.
Dow down to 8000 or so in the next 2 years.
The Fed is certainly trying to deal with the “confidence” issue. However, any smart investors should know the depth of the problem (subprime + credit crunch) and start selling when rebounds like this happen. Trying to boost the “confidence” of the market in such a way is, sorry to say, a bit naive. It might elicit a further fall when this pseudo, 2-day-confidence falls again.
Over the weekend, I did a partial analysis of the mortgage market based on the most recent Zillow “underwater” and delinquencies data [12/31/07] and other information reported in the financial press [size of subprime lending, size of total non-refi originations since 12/31/2004, etc.]
I concluded that, even if non-reporting entities such as hedge funds, individuals, and foreign buyers of MBSs, CLOs, etc. have already written off $150 billion [same as the reporting entities have, so far] that there is another $150 billion to $450 billion of losses out there yet to be recognized and shared out.
Non-recourse loans, whether prime, jumbo, alt-a, or subprime are at least partial losses when the value of the property is below the principle due, which Zillow says was frequently the case at 12/31/07. My guess is this affects as many as 25% of all mortgages made in 2005, thus leading to a weighted average of 31% of all mortgages made in the past three years.
And that’s at the 12/31/07 prices in those markets where home values are falling. They’re still falling in most of those places and likely will continue falling out into 2009 in many of them, so the percentages get bigger and bigger.
The strategy for the underwater home buyer with a non-recourse loan is simple — stop paying. do nothing until you get evicted in six months. then rent for three years, and finally buy back a similar house for a lower price using the down payment you’ve saved in the meanwhile and your then repaired credit rating.
This sticks most of the loss from the home value decline on the owners of the mortgage paper while the buyer walks away, perhaps even with his small down payment [six months of not paying at all is near 5% of the loan amount].
Add together the underwater buyers, the speculators, the lying buyers, and the ones who’ve lost their jobs and the total possible losses are a fair bit bigger than we’ve seen so far.
And so I think the PMI underwriters are in big trouble. I think the monoline insurers are in big trouble [add up their total equity and loss reserves, deduct a couple of billion for their municipals business, and how much is left to absorb the possibly real losses?].
And I think mortgage hedge funds and other owners of the various bits of paper are in big trouble.
FNM and GNM could be in big trouble, too. Non-recourse prime loans are also at risk.
***
If this rally builds a bear flag [as prior ones did] get ready to go short again.
The bear market is absolutely positively not over…it is just beginning. Our economy is experiencing more problems than ever before in the country’s history. Falling home prices, record mortgage delinquencies and foreclosures, a plunging dollar, soaring food and energy costs, job losses, negative real wage growth, banks on the brink of insolvency, mortgage companies and hedge funds going under, GSEs (Fannie and Freddie) on the brink of nationalization, muni bond auctions failing, education loan providers going out of business, record high consumer debt levels, less equity in our homes than debt for the first time since 1945, soaring numbers of people with upside down mortgages…..and people think the stock market is going higher???? Take a reality pill and realize that once the horrid earnings reports start coming out for Q1 that we’ll hit Dow 10000 in no time. It’s a ticking time bomb, and I see a 1000 point one day drop coming very soon. The only thing that can keep my predictions from coming true is more and more intervention from the Fed, which seems to be completely reinventing modern monetary policy. Scary times indeed my friends.
The basic, terrifying problem with our economy does not have to do with Wall Street. The problem is that there is so awfully little cash or credit left among the general populace. Infusing cash into the banking system will not help John and Jane Doe (and their two little kids) meet the mortgage or do more than meet the mins on their growing credit card debt or try to fill the grocery cart despite their soaring weekly supermarket bills; nor will this cash infusion allow the general populace to turn on the heat or fill the gas tank. And don’t even mention the coming tax rebate – - it is way too little to do more than boost us up for a couple weeks or so. Why isn’t Washington reacting to the price per gallon of home heating oil or the stunning prices at the gas pump rather than helping the rich out on Wall Street (hmmmm, did I just answer my own question?)
We can all cheer the “rally” – - just remember: Eat, drink and be merry for tomorrow…”
The inevitable personal credit crisis is coming and will be another hurdle for broad markets to get past… I think there should be no hurry to be jumping in and cautious buyers over time will have to wait to be rewarded.
GEE… YOU HAVE TO LOVE LAME DUCK PRESIDENTS. NO ONE WANTS TO GO WITH A RESESSION AS A LEGACY ON TOP OF ALL THE OTHER GREAT ACCOMPLISHMENTS ALREADY IN THE BAG. MR. BERNANKE AND COMPANY ARE FAST USING UP ALL THE ARROWS IN THE FED QUIVER WITH LITTLE APPARENT EFFECT. I JUST LOVE THE EXCITEMENT OVER THE 400 POINT RISE AND THE ACCOMPANYING RATIONAL. “THIS RALLY HAS GIVEN A TREMENDOUS PSYCHOLOGICAL BOOST TO INVESTORS. YEAH.. LIKE FORMING A LINE OF PEOPLE WITH BUCKETS TO BAIL OUT THE TITANIC. FEELS GREAT NO REAL EFFECT.
I agree with the comment below that the 900 lb elephant in the room is that the American Consumer is out of cash. Here’s the simplest way to explain it: If somebody takes home $500 per month, they cannot possibly go out and spend $1000 in that same month. We are essentially telling the American consumer to do just that. We’ve been overspending and cashing out our houses, and using them as ATMs for the last 10 years. That was all fine and dandy until the bills come due and nobody can pay. Then, once the banks get burned, they stop lending money. As a result, we are in a recession.
I have seen the writing on the wall for quite some time, however nobody ever took what I had to say seriously – until now. I have very little doubt at this point that we are headed for something parallel to, or worse than the Great Depression. It will be on a worldwide scale. Anyone who doesn’t think so just isn’t paying attention.
The sad part is that the Fed *SHOULD* just allow this to happen, and the people who are overextended and made stupid decisions will suffer. Instead, the Fed will continue to bail out the most irresponsible among us by printing money out of thin air. The end result is that we ALL suffer, and those of us who have been responsible and saving money, will need to start draining our savings accounts just to buy a loaf of bread. What a joke this economy is. We need to let this correction happen and the sooner we do, the sooner it will be over. Banks need to go under, and people need to lose their homes. It’s the only way we’ll learn.
Just remember Glenn Beck’s most recent quote from his article: “It’s fine to follow the herd, until they all run off the cliff together”.
I for one am real happy that president
Bush and the Wallstreet insiders did not get their way on investing Social Security moneys in the market!
This rally is nothing more than a fool’s rally. There has always been plenty of money on Wall Street at a reasonable price but what Wall Street is looking for is cheap capital to invest and that is gone. I don’t care how much you pump into the market or how much Bernanke cuts interest rates. The value of homes is going to crummble there is no stopping it. It is like trying to keep the TITANIC afloat
Regarding David Bernier’s comment:
“If MSBs are
like bonds, wouldn’t they also
have a maturity date, say in
15, 20 or 30 years?”
It’s my understanding that these MBS, which have 15-30 year terms, have been pledged as collateral on the Fed’s TAF notes, which I believe have a 28 day term. If the TAF loan defaults this collateral becomes property of the US Government. As I understand it.
Thanks.
It is intersting that just as the Carlyle Group is backed into a corner with a potential $16B hedge collapse…suddenly an unprecedented move by the Federal Reserve offers the liquidity and time that Carlyle’s CCC fund needed.
Finally, the son returns the favor to the father.
The article says the market does not follow through 40% of the time. If you were going to pick one of the 2 out of 5 situations in which it would not follow through, would this be one? It would for me.
The big move on Tuesday has more to do with The Fed’ protecting the interests of Wallstreeter’s than it has to do with any sort of correcion in the fundamentals of our economy.
More than at any other time, the American economy has become nothing more than “Smoke and Mirrors”
I have a question about
mortgage-backed securities (MSB)
that the Fed. has accepted as
collateral. Usually, bonds
have a maturity date when the
principal is due. If MSBs are
like bonds, wouldn’t they also
have a maturity date, say in
15, 20 or 30 years?
I do not think we are even close to the end of this bear market. There are a lot of bad news hidden that has yet to be divulged as the big banks etc. have not figured out how bad their respective situations are.
Instead of letting all this mal-investment be purged from the system, the FED is doing is exacerbating the situation. Time to put Glass-Stegal back into place.
The piper will be payed whether we like it or not.
In the old days they called rallies like this “Bear Market Traps.” It appears that the fed has the attention of the big market players and is doing everything it can to keep their portfolio values intact. But, just how many more tricks have they, the Fed, in their bag? Each time they come up with something to correct the downward slide in the markets, in a few weeks the markets continue their natural downward trend and then all of the talking heads(on CNBC) and the big players, who want the bull market to keep going, ask for additional tampering. It is a bear market and a recession we are in. Let it go its course. Textbook economics tells us it is just part of a continuing cycle.
This $200B injection smacks of a Fed bailout of the banks. Imagine the following sceanrio:
Banks put up their “subprime Mortgage Backed Secuities” as collateral and receive “real” dollars, at face value of the securities. In 28 days the inevitable default occurs on the banks note and the Feds call their collateral (the junk MBS) which are backed by Fannie and Freddie. And who stands behind Fannie and Freddie to “make investors whole” – the Federal Governemt (who know holds the banks bad debt). This is a net lose-lose for the American taxpayer IMHO.
Financial trickery using printed money will never make up for fiscal irresponsibility. Our economy will go downhill for some time to come, and so will the stock market.
No the crunch has not ended. This is just temporary. Everyone hopes that it will be the beggining of a rebound but I say this is a great time to short some stocks(financials sector)that have rebounded over the last two days.
Does anyone remember Germany after WW1. They printed lot’s and lot’s of money. Didn’t work for them
Those who ignore history are doomed to repeat it!
The market is oversold. I believe that when we look back we’ll find that our biggest problem is information overload and one sided information at that. The general trend of the media is to focus on doom & gloom with a tendancy to exaggerate the bad while glossing over the good. What truly differentiates todays market from the past is participation by the non-professionals that don’t have money management experiance and are emotionally controlled. They buy and sell wrong creating greater volatiliy and flashier headlines, but given time, I’m hopeful that the market will continue to follow fundamentals over the long term.
Credit crunch is over but only because i’m sick and tired of hearing about it. Once the media realizes it, they will move onto something else and consumer confidence will go back up.
How about everyone write a letter/email to the FED instead of posting on a blog! I seriously doubt any of them read this blog. (no offense blog owner!)
Everyone is still ignoring the 900# gorilla in the room. The American consumer is out of money. Between over spending, inflation and a slowing job market, there is no way “consumer spending” will continue like it has in the past. More cheap money in a world awash with cash wont change that. It will just create a new bubble as all the gamblers holding all that paper look for more easy gains.
The worst of this credit crunch is not even close to being over. The most toxic of these subprime mortgages were originated in 2006 and early 2007. With a 2 year reset, which I believe is the shortest term you could get on an ARM, that means those rates are just reseting now, which means people are still paying teaser rates, so once they shoot up they will limp along until they cannot handle it anymore and forclose, so I predict this will be slow pain for the next 2 years.
Sorry, but the FED needs to stop printing extra money and allow all the Markets to re-value themselves. We are miles and miles from the bottom on this cycle and every one needs to stop getting all spend happy every time Ben decides to print more money to help prop up Banks and Financial Groups that failed to read the fine print on all of those trash Sub-Prime Mortgage Back Securities.
Just get use to the idea of our money being worth less and less as the FED keeps printing more and more money.
If you give someone who is down and out $1000, if 3 months they will be right back where they left off – looking for another $1000 to help them get by. That is all our government is currently doing. yes it helps, but it’s only a temporary quick fix which was most likely done to save face and avoid using the “recession” word. The real problem is that the decent paying careers have gone over seas and were replaced by many low paying jobs. On paper the country did well by adding all these “jobs”. But the truth is that those new “jobs” don’t pay enough to cover the bills. Inflation will continue and a recession is inevitable if people have little means of covering their expenses. And we are all aware of the rising cost of gas, food, health-care, the lowering values of our homes, and wages that are lower today for the majority of Americans. Not to mention the high cost of education that many people forced into new low paying jobs cannot afford to improve their situation. Thanks government for your 2-3 month fix. Where will you be in another 3 months and what kind of help can I get then? what about 6 months?
What is the biggest indicator that we are in a bear market?
They usually have the biggest one day gains. The last similar move was 2002 – middle of shallow recession. A lot of short covering happened yesterday.
As an average guy all I can do is have a balanced attack and buy more shares every month through 401k and Mutual Funds. Dollar Cost Averaging is all I can do, I don’t have 10’s of thousands laying around to play the markets like you pros. I have to be a long term investor.
I agree, this is not over, 400 up will run up more, but not so much. The next sell off will be greater than this. I mean come on, when gas at the pump hits $4/gal it will send another big scare.
My gut tells me that yesterday’s $200 billion infusion in return for worthless paper was like giving more heroin to a heroin addict in the hope that it will ween him off the stuff! And when this same addict evinces sudden signs of withdrawal Dr. Bernanke has been only too willing to do whatever it takes to get the patient through the worst of it. Throw more of our money at the problem to buy time… It’s an election year, stupid!
But WE won’t know if the worst is over until the scope and depth of this debacle known as the “credit crisis” becomes more transparent. And I haven’t heard anyone saying when this will happen. That would suggest that the worst is not over – YET!
This rally will last for a couple of days, 200 Billion is a drop in the bucket! Who wants treasurys at this price? After the Olympics even China will throw in the towel.
Why is it that CNN hates to see anything positive happen in the market? You downplay any rally, but absolutely LOVE to post doom and gloom. It’s irresponsible to not provide a balanced view of the market. There IS hope out there, why are you afraid to write about it?
This talk-back seems oddly similar to the previous one where we were asked which was worse, the slowing economy or higher inflation. Yes, the Dow surged over 400 points. Great. Thats one week worth of loses. Now, what about the fact that we still need to gain nearly 2000 more points to just meet the average we were at just a few short months ago. Is it over?
No way. All the trading yesterday was simply investors trying to make a buck, and is based more off of their “wonderful” speculation versus actual economics. If it were to truely effect the economy, wouldn’t we see this surge after-the-fact of the $200B injection into the economy? Absolutely. So what was yesterday all about? Just the greedy people of Wall Street trying to make as much money as possible by pumping their money back into a stock market they abandoned just weeks ago. The same people that have been begging for interest rate cuts from the FED that (have they not noticed?) have been driving the dollar down and oil/food/overseas products/everything up. I thought that the American people were Washington’s constituency, not fat-cat greedy investors and bankers on some completely overrated street in NYC…
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