Good news doesn’t count
We’re reaching a very interesting point. Nothing has worked to make the markets respond positively. The Paulson $700 billion bailout, the Fed buying commercial paper, the UK bank recapitalization, the coordinated rate cutting by all the world’s central banks — and still the market goes down. The world’s governments and monetary authorities have made it abundantly clear that if one thing doesn’t work, they’ll move on to another — they’ve done in a few weeks more than was done from 1929-1933 to fix things, and still the markets decline.
Oil touches $86 a barrel, and American Airlines trades about where it did when oil was $147 a barrel. The IMF calls for a “global solution,” and most of those steps are underway in one form or another. And after all that, the Dow is off 2% and the FTSE is off 5%. Strange as it may seem, we find this picture encouraging. Bottoms form when very few have any confidence in a bottom forming. That seems to be the case now. Maybe things are unfixable, and the world will go to hell in a handbasket. Otherwise, things might get a little better in coming days — at least for a while.
October 9th, 2008 at 3:17 am
One of the contributors to that is that a left-leaning press is talking down the economy for political reasons.
October 9th, 2008 at 3:48 am
The S&P 500 was up about 2.5%, and then shudder it fell by 3.5% in the last 30 minutes of trading.
Strange as it may seem, we find this picture encouraging. Bottoms form when very few have any confidence in a bottom forming. That seems to be the case now.
My brain thinks that’s a valid assessment while my gut protests that it’s crazy.
Whatever happens in coming days, things will be fine in the long run.
October 9th, 2008 at 5:06 pm
We’re at the point where the government needs to allow time for the changes they’ve made to take effect. How many times have you read about a driver overcorrecting for a skid and losing control of his car?
At these interest rates, with the government pumping money into the economy at this rate, there can’t be a credit crisis. If I had the cash, I’d be buying.
October 9th, 2008 at 5:27 pm
Well, we are 2 weeks into the dam busting news about the credit market freezing. By this time anyone wanting out of the market is likely gone, or has been forced to liquidate.
We should start to get some good news and see that the markets don’t react. I think that is when the bottoming starts.
October 9th, 2008 at 9:23 pm
According to Barry R., Lehman\’s 400 billion in outstanding credit default swaps has been unwinding, causing much of this market\’s turmoil.
http://bigpicture.typepad.com/comments/2008/10/lehman-cds-unwi.html#more
October 9th, 2008 at 10:36 pm
All my indicators (and my analysis) agree with you, that this was just a good old-fashioned bank run that has just about burned itself out. However, there’s one alternate hypothesis that fits almost all the data, and which I cannot immediately test:
The market is discounting an Obama win, and is indicating that his policies will be far more destructive to capital than anyone (including myself) currently believes.
I say it *almost* fits the data, because I would think that in this case, $/gold would be hitting new highs, but it’s broken trend and headed down. Unless the idea is that new policies will be destructive of capital while being either non-inflationary or outright deflationary, which might make sense if Rubin is to be the new SecTreas and have a major policy voice in the executive.