Boy was I wrong...
I guess all the kings horses & all the kings men couldnt put the market or the economy together again.
It now seems that the forces of contraction, especially with credit, are overwhelming even the most dynamic & unconventional efforts to stop it. The economic data will continue to reflect a very weak economy & plenty of uncertainty about the near & intermediate termoutlook. Corporate reports will also reflect the weakness & serious economic challenges to their businesses going out 3-9 months. The election will add further uncertainty to the situation...and lets hope its a clean election with no uncertainty about the outcome, i.e. contested election. While it looks as though the financial system will survive, the resulting economy & business enviroment will remain highly uncertain & risky for the next few months & quarters.
Suffice to say...I'm alot less bullish.
Bear Market Bailout
Don't Fight The Treasury, especially if they are backed up by the FED, SEC, Congress, & The President
After watching the Sunday morning news programs, I have completely rethunk my macro thesis...most importantly for the short term.
It has become increasingly obvious that the Treasury secretary, Ben Bernanke, Congress, & the President have gotten together & decided that they will not allow free markets to be free, that freedom would do bad things, so the financial super heros have come together & agreed to use all their powers to stop the free markets from being free.
Their reasoning & purpose is irrelevant. Fear is the motivation. They have the powers & tools to do what they want with no checks or balances....at least thats what they want.
Bazooka...haha, we are about to use the equivalent of a nuclear bomb to recapitalize the entire banking & financial system of the United States. The collateral damage is secondary to the task at hand.
We are also going to help out China, Japan, Saudi Arabia, & many other foreign governments & corporations...this is vitally necessary in order to get them to lend us more money in order to have enough money to execute the bailout plan.
The urgency & cooperation is scary, and seems to suggest that it's a done deal.
If this goes forward, banks are fine. The consumer will get a break in the form of easing credit & another stimulus package. Housing will most certainly get some more help. The automobile industry already begging, will now get its bailout.
I wouldn't be at all surprised if the FED decides to add its two cents by cutting interest rates adding even more power to the bailout punch.
Finally, the focus on & demonizing of the evil short sellers seems to have a lot of popular support, so maintaining short positions or viewpoints will be at an even greater disadvantage than they usually are.
While I am still convinced that the general economy has its problems, all this artificial support & stimulus will have an immediate & important impact on the general economy & probably the mood & confidence of the public. Bear market rallies can be quite strong & powerful.
Perfect timing to make sure the election is a happy one & the holiday shopping season is a profitable one.In short, I'm bullish on America!
Showing posts with label federal reserve. Show all posts
Showing posts with label federal reserve. Show all posts
Sunday, September 21, 2008
Fundamentally Sound...
We have been told over & over & over & over & over & over & over by administration officials, three treasury secretaries, two FED chairmen, congressional leadership, & the president that our financial system is strong & our economy is fundamentally sound.
Something must have changed this week. Based on the most recent events, which we are told almost caused a collapse of the banking system, there can be no doubt that our financial system is NOT strong. And there is a very good argument that the economy is NOT fundamentally sound.
If the government has to rescue or bailout the entire banking system in order to avert a systemic financial collapse, that is not good, strong, or sound. Whatever the new & improved resolution is, it cannot be done with ease or inexpensively. There will be huge & mostly negative repercussions resulting from the things that are being planned in order to fix or save the system. Doing nothing & allowing the problems to play out would be worse, much worse, than doing what our leadership is telling us we must do to prevent the natural course from happening.
Trust & confidence is in tatters. Foreign investors cannot be looking upon this as good or leading to a better investing environment in the US. Since we rely on foreign “generosity†in order to fund everything we do, that will prove to be a very bad thing. Interest rates will rise dramatically & the US dollar will decline in value. Gold will rise in value. Our financial health will continue to deteriorate whether or not the bailout proceeds.
We have been told over & over & over & over & over & over & over by administration officials, three treasury secretaries, two FED chairmen, congressional leadership, & the president that our financial system is strong & our economy is fundamentally sound.
Something must have changed this week. Based on the most recent events, which we are told almost caused a collapse of the banking system, there can be no doubt that our financial system is NOT strong. And there is a very good argument that the economy is NOT fundamentally sound.
If the government has to rescue or bailout the entire banking system in order to avert a systemic financial collapse, that is not good, strong, or sound. Whatever the new & improved resolution is, it cannot be done with ease or inexpensively. There will be huge & mostly negative repercussions resulting from the things that are being planned in order to fix or save the system. Doing nothing & allowing the problems to play out would be worse, much worse, than doing what our leadership is telling us we must do to prevent the natural course from happening.
Trust & confidence is in tatters. Foreign investors cannot be looking upon this as good or leading to a better investing environment in the US. Since we rely on foreign “generosity†in order to fund everything we do, that will prove to be a very bad thing. Interest rates will rise dramatically & the US dollar will decline in value. Gold will rise in value. Our financial health will continue to deteriorate whether or not the bailout proceeds.