Adam Smith wrote about how markets correct themselves, but we have forgotten the premise for that to happen which says: when people make “rational choices” in the pursue of their self-interests. Free market theory assumes people make rational choices, and many of us haven’t been doing that lately… In the late 90’s early 2000, the gas started going up, but everybody was driving a Hummer, an SUV, or a truck… Most recently, I saw many people taking over mortgages they knew they couldn’t pay… not very rational.
It’s been also happening in our country for some time, that we are so desperate after the fast buck, that for a long time we have not been producing any real value: money is created overnight via take overs, buyouts, buting and selling debts, etc.
This inflates bubbles, it looks that a lot of wealth is being produced, but there’s no real underlying value. This happened with the tech stocks in the 90’s the Internet stocks that never met expectations…
FYI – Eurpoean Newspapers are already calling the USA the EX-Superpower. So we really don’t have to worry about pretending to be great anymore.
As to the “sell-out” it would only throw good (taxpayer’s) money after bad money.
In a true capitalistic world, the risk is with the business, or banks in this case. If business leaders are not capable to run a profitable business – whatever the excuse – let them go under!
Why should the taxpayers give their hard-earned money so these people can keep their jobs?!
Please explain why a bank in default like WAMU should be paid $1.9B by the bank that assumes its liabilities. Who gets the $1.9B.
No. It is a Dow 30 component, so it affects the DIA price. But, it is a good broadcaster (NBC), a mediocre importer of cheap imported Chinese goods, and a weak financial stock.
They are an international conglomerate, and it’s not clear what their strategy is anymore.
If Thomas Edison were alive today, he would be rolling over in his grave.
I have a hard time figuring out what the stock market actually DOES care about.
Obviously, what ever they care about it isn’t farther ahead then a few hours. Because it seem pretty obvious that in time frames longer then that, like days and weeks at this point, things are looking mighty bad.
So the government buys up all the bad debt. Then what? The banks start lending money to people who can’t pay it back to buy houses they can’t afford so they can sell the loans packaged up to huge funds who can’t be allowed to fail again? Is this what we are doing?
The housing market isn’t going to “recover” until houses are down to a price that workers can actually afford, AND until those workers save up some money for a down payment. This is going to take time. NOTHING the government does is going to change that.
Nor will it change the rising unemployment, nor will it keep foreclosures from rising. It just is not going to change the fact that the American Consumer has RUN OUT OF MONEY. And they are already so far in debt they can’t afford it now, much less borrowing more.
This whole thing is just the biggest heist in history. Ack ptooy!
As of now, I plan to leave the voting for President blank on my ballot. However, if either candidate has the balls to vote against this stupid so-called bailout, I might just vote for him.
“Doom and gloomers” he’s calling us now?
Is this guy in a coma?? Doesn’t he see what’s going on around him?!
Just a general comment for CNN.
Please stop missinforming about the “credit freeze” or that nobody can get a loan anymore.
It is not true. The true is that banks have gone back to the traditional lending standards in terms of risk assessment and creditworhtiness.
Why?
- Because Banks cannot sell those loans in the securitazion market and have to keep it in their books (they wouldn’t want to have a worthless loan there) because
-investors in the bond market (where banks try to sell all their loans) are paying more attention to the counterpart risk (if the borrower can pay the loan on time, principal and interests).
They don’t give loans to anyone who fogs a mirror anymore and that’s a VERY GOOD thing as lax lending standards put us in this current mess.
LOL,
GE,GM,MicroSoft,Lehman Brothers and all the other Wall Street firms are now part of the dust bin of history.
The US has lost all claims to being the sole super power.
The bail out is not going to help our economy. The toxic loans and bonds that are being brought by the US government are all owned by the Chinese, Arabs and Russians. We have been sold out to our enemies for a hand full of silver.
The DOW Jones average should be dropping to 100 points if people understand what has just happened. The US is officially broke now.
The end will come before Christmas.
I like Jimbo’s comments below. I would like to add one more thing to what he said at the end.
If a producer of goods can’t make a profit from what they manufacture, especially after they remove US jobs in lieu of cheap labor abroad, then they should not be allowed to try and become a bank.
Why would bad performance by a Chinese company like GE upset me? Check out any GE product in your local store – all made in China.
Of course GE is no longer a bellweather nor is any other American company. The stock market has grown wings of its own. It flies in an ethereal atmosphere and only rarely glances at the real world. As a result, the daily swings of the Dow resemble a paniced skier, racing down a mountain with an avalanche on his heels. Company performance no longer matters in this cold world; the only measures of value seem to be whether results met or exceeded analyists’ expectations and what bad news made the headlines this morning.
Part of the problem with the economy right now is corporations that produce durable goods have opened financial entities to make money. As the editorial states with GE most of their profit comes from finance based business. Why? They should be making durable goods for a profit.
All major corporations have finance wings, GMAC, GE, Ford even Walmart tried to become a bank.
A set of regulations that prevent corporations from becoming finance providers would have went a long way toward preventing this financial meltdown. If a producer of goods can’t make a profit from what they manufacture then they should not be allowed to try and become a bank.
Don’t worry….the market will come back down tomorrow. Everyone just needs to push all the little schoolgirl emotions out of their system and come back to logic. It is simply the facts that count.
At this point, I really do not care about the large companies in this country. I feel it is time everyone stops writing about and acting that Wall Street is God and we must all bow down at the street sign. Maybe start telling the stories of the struggling “working class” who have no money, paying for the sins of others,
and who just are feeling lost in what our government and “big business” has done. Personally I am sick and tired of the booh hoo of the rich!
The only thing moving the market today is the $700 Billion bailout package.
Tomorrow, on the other hand, the fact that unemployment is rising, housing is falling, and corporations are still hurting will matter.
who needs a bellwether when the government saves the day. whatever, looking at sentiment on a daily basis for a year will reveal that traitors pick and choose what they want to react to…some days it’s a company’s earnings, other days it’s a jobs report. not one is consistently influential- only arbitrary. besides, who looks at one thing to determine market flux…maybe word your question differently.
as for Buffett’s investment as a bellwether- you can’t take that at face value alone…i have my doubts that he did it to get in at the right moment. Rockefeller invested in the market just after the crash of 29 but he was asked to do it along with other bankers to instill confidence.
Does anyone want to join me in passing out bibs on wall street?
And nobody cares about the record high unemployment claims (now we’re at levels of just post .com), or the record low durable goods orders. Nobody cares in Wall Street because they only thing they can see or care is the money they are going to receive from the taxpayers. Job well done!
Paul, I have commented on your columns several times in the past month and there is no ‘hate’ in any of my postings. But, geez, talk about Pollyanna creep. I swear you must be ultra long this market the way you talk down the facts before us. GE is in trouble; they have a massive leverage problem that may indeed lead to its downfall. So, from that perspective they are still very much a bellwether of the bloated, bursting U.S. economy. And, please be careful here regarding the behavior of the U.S. equity markets while the short clampdown is in effect; the rules have been changed, the goal posts have been moved for now. The market’s action is arbitrary until the Gestapo (SEC) allows free trading to reign again. And it will…eventually. Let’s see where GE is in late November…and we’ll know then if it’s still a bellwether. Not today and not tomorrow. Folks, be careful and good luck.
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It is funny how much people believe GE is a chinese importer. Please someone read a 10-k and you will notice that their industrials group (Light bulbs, dishwashers, etc) make up less the 5% of their total revenues and the company is divesting it. The company does employ over 100,000 americans so maybe that should be important.