O Bailout Package, Where Art Thou? 42 comments
an article to
-
Font Size:
-
Print
- TweetThis
This market just gets more and more surreal. We saw the release of not one, not two, but three pieces of abjectly awful US economic data. So naturally, on Friday equities surged higher and government bonds tanked ... because of more hopeful noises over the passage of the TARP.
The orders data was wretched on both a headline and core basis. The core shipments figures, which get plugged straight into the GDP calculation, were also awful, prompting at least a couple of immediate Q3 forecast downgrades.
Meanwhile, just when you thought that the housing data had lost its capacity to shock, the new homes sales figures dropped 11.5% month-on-month. The way things are going, they'll soon be able to publish housing data by name, e.g. "This month Fred and Mavis Smithers bought 687 Walnut Lane in Pig's Knuckle, Arkansas." The one housing figure that we follow here is the supply data; as the chart below illustrates, there is no real improvement in sight.
Finally, the jobless claims data were also poor, registering a new cyclical high. The continuing claims data, which provide a smoother series, suggest that we should unsurprisingly expect the unemployment rate to continue rising.
All of this helps to explain why I remain medium-term bearish on global equities, particularly as both the real-economy and financial-system pennies are about to drop in Europe.
In the near-term however, the Paulson Package is dominating both the headlines and market sentiment. First, markets rallied on hopes that the package would be passed imminently; then, the collapse of WaMu (WM) (is it just a coincidence that this happened during the TARP debate?) and Congressional intransigence sent equities careening back down. Amongst my colleagues, the US Congress is starting to look like a bunch of hapless yokels such as one finds in a Coen Brothers film. In fact, if you listen closely enough, you can hear the market shouting "O Package Where Art Thou?"
Indeed, the whole sordid situation of the past several years resembles the entire Coen Brothers oeuvre. The duo's filmography offers a number of insights into the financial crisis. Consider:
Blood Simple (1984): It's bloody simple. The US economy and financial system are completely buggered, and Europe ain't far behind.
Raising Arizona (1987): The aim of the TARP and every other measure taken by Team 1250 is to raise house prices in Arizona, Alabama, and each of the other 48 states.
Miller's Crossing (1990): Somewhere, there must be a back-office clerk named Miller who is involved in trying to cross-net Lehman-facing trades.
Barton Fink (1991): "Fink" is probably among the more innocuous of the four-letter words being used to describe Mr. Fuld and others.
The Hudsucker Proxy (1994): Let's see....a group of businessmen attempt to manipulate their stock price so they can make a killing. The characters are all either deeply cynical or hopelessly simple. Hmmm ... I can't find any possible correlation to the current situation, can you?
Fargo (1996): Unfortunately, Jerry Lundegaard's financial distress may soon be echoed throughout the United States. His snowballing of GMAC (obtaining a loan for a car that didn't exist) is a microcosm of this entire crisis.
The Big Lebowski (1998): A number of erstwhile financial market participants will soon be adopting the lifestyle of The Dude.
O Brother Where Art Thou? (2000): As above.
The Man Who Wasn't There (2001): Two words: Jimmy Cayne.
Intolerable Cruelty (2003): A pretty apt description of how my mates at Lehman London were treated by Lehman New York over the past couple of weeks.
The Ladykillers (2004): Scottish Widows' parent company, Lloyds TSB, is down 35% so far this year. The outlook for UK financials remains grim.
No Country For Old Men (2007): As noted a few weeks ago, this is no market for young men.
The Coens' newest film is called Burn After Reading. It's hardly a stretch to believe that that is exactly what's being done to the hard evidence of various parties' misdeeds over the past few years.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largest
increase in followers
in the last 7 days-
1
TraderMark
-
2
David Fry
-
3
Peter Schiff
-
4
Paco Ahlgren
-
5
Philip Davis
Fastest Climbers » -
1
-
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
Top
StockTalkers.-
1
David Fry
-
2
Cliff Wachtel
-
3
Mike Havrilla
-
4
David White
-
5
Hedged In
Top StockTalkers » -
1
fed up, re: pointing fingers. Believe it or not this is a collective screw up. Very rarely do I hear anyone accept responsibility as an 'over-consumer'. There is way too much materalism in America. For years most of the herd has been in an escalating 'stuff' race with each other, trying to get ahead and look better than the neighbors. The herd has as much blame as the greed-brokers and blind politicos.
Now, we all are going to be forced to learn how to live within our means, learn to say no to many purchases, learn to keep our cars to 150,000 miles, wear shoes out, find cheap vacations, etc. THAT, will be a good thing for us all.
The reason banks are not lending is because there is no one to lend to...
People with poor credit are broke; no credit for you!
People with good credit are smart enough not to borrow too much!
Giving the banks more money to lend solves nothing; unless we're going to pick up where we left off and start handing money to anyone for any reason; good credit or not.
wpdragon: great post, as you, it makes me almost violent to think of what these bastards are pulling-off at our expense but I also remember the stories my parent told of the great depression so I guess the answer is we suck up our indignity and hope Bush's ship of fools put something on the table this weekend that will get passed Monday or Tuesday.
If the bailout fails credit markets freeze up and paychecks start bouncing.
If the bailout succeeds the dollar ceases to be the world's reserve currency. See Dean LeBaron's website and watch his excellent videos. Also, read his books.
The heart of this crisis is long in the making. It is the deficit spending of the US gov't. This is the millstone around the economy's neck that made lowering Fed funds rate essential. Otherwise, we would have had this crisis five years ago. The "bailout" is another attempt to kick the can down the road a few more months.
The other heart of this crisis is also long in the making: poor corporate governance. It is an abdication of fiduclial responsilbility to allow the CEO to be chairman of the board, or any member of management to be on the board. The gigantic salaries and bonuses of CEOs were justified by claiming to align the behavior of the CEO with the interests of the company, but instead aligned the behavior of the company with the interests of the CEO.
IMHO
Well HERE'S MY MESSAGE - LOUD AND CLEAR - THIS TRILLION DOLLAR BAILOUT PACKAGE OF THE IRRESPONSIBLE CROOKS ON WALL STREET WHO BANKRUPTED THEIR COMPANIES INTO THE GROUND IS TREASON AGAINST THE AMERICAN PEOPLE. BAILING THEM OUT ENCOURAGES MORE OF THEIR CORRUPTION AND IRRESPONSIBLE BEHAVIOR. IT IS AS JIM ROGERS SAID "WELFARE FOR THE RICH." HE ALSO SAID THAT PAULSON IS BAILING OUT HIS FRIENDS ON WALL STREET.
Let the companies FAIL. Let's bring back INTEGRITY, HONESTY, AND SOUND FINANCIAL PRINCIPLES in America. We we Americans really benefit by bailing out the crooks who caused this mess / crisis in the first place? HELL NO! This is TREASON AGAINST THE AMERICAN PEOPLE!
If you work for a company that doesn't have enough cash in the bank to make payroll and relies on borrowing to cover it, I would think that you might want to consider looking for a different employer before the search is forced upon you.
The post making the point that some businesses rely on short term borrowing to cover payroll was a good one.
However well it may turn out in the short run, unless the business is building its bank account and can reliably predict a date in the not too distant future where that need to borrow will cease the risk of the business failing is rather high.
Artificially low interest rates may make this possible, but it's probably not a prudent way to run a business. One "oops" and the company could be done.