Thinking About the Next Six Months 25 comments
-
Font Size:
-
Print
- TweetThis
The TARP rescue package passed in the House of Representatives today. What happens next?
My guess is that things settle down slightly in the credit markets, but that spreads remain gigantic, with destructive rates to the best borrowers and virtually zero lending to the worst. The Fed will respond with more rate cuts, taking things to Japanese zero rate territory and more or less leaving it there. That won't change things materially, but it will take off some more pressure.
More broadly, it is likely we will see some serious problems with the weakest debt-dependent cities and regions. They will be unable to borrow at rates that allow them to squeeze through any longer, and we will see stories about cities looking at cutting back to bare bones on essential services, plus failing colleges, etc. Expect oodles of those headlines, and more demands for bailouts.
Some time after the U.S. presidential election, with credit markets still a mess, banks failing all over the landscape, and no real end in sight, we will likely see the new president pull together some sort of TARP II commission. What should we do, post-Paulson, to prevent this crisis from further deepening and continuing? Top of the agenda will be further fiscal stimulus, and, in all likelihood, an explicit recapitalization of the banking system, with government picking favorites.
Cheery thoughts. Feel free to disabuse me of them, of course. Or tell me I'm optimistic. Whatever works for you.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
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
TopSee all
StockTalkers.
Top StockTalkers »
This article has 25 comments:
Looks like the People's Republic of California will be the first domino to fall. See
news.yahoo.com/s/nm/20...
We don't have free markets and we don't have capitalism. What we have is a bankrupt, or soon to be bankrupt economic philosophy of corporate welfarism masquerading behind free-market ideology supported by both the Demorcratic and Republican parties. There's only one thing to do: vote the clowns out of office on Nov. 4 who supported this RIPOFF.
Correcto mundo!
Interesting to watch the DOW and NASDAQ charts tank after the vote. I guess investors were expecting a +777 on the DOW.
Bush and Paulson have given the ultimate golden parachute to their Wall Street buddies at the expense of everyone else. Who would have thought, after 9/11, that the American way of life would have been destroyed by our own government.
Why should the Fed stop at zero? Our government is spending money like drunk sailors on a Cinderella liberty call. They can just PAY individuals and institutions for borrowing money! Ya! The more money you borrow, the more many they'll pay you.
More holes are forming in the dike... New York is in big trouble and California wants a $1 billion "loan."
FULL DISCLOSURE: I'll soon be buying stocks in companies that produce bottled water, soup, firearms, ammunition, wheelbarrows (to cart the worthless money around), armored cars, as well as executive protection firms. Perhaps "Dutch Boy" paints...I sorta like the dike thing...
You forgot booze and pawn shops.
I'm developing plans for a buggy-whip factory.
The starter house I first bought in 1985 for $60,000 is now "worth" over $250,000 (based on zillow.com).
So the dollar has lost roughly 75% of its value in only 24 years, and we're on the verge of doubling (or more) the supply of dollars in circulation. Can anyone claim the dollar won't lose value and keep a straight face?
potential closures more or less 6.000.000 households,
bailout/potential closure $ 116.667.
Conclusion: $ 700b is enough if expended wisely wishfull thinking...
the problem is of solvency, why they are focused in liquidity?
Bad banks must die and their depositors needs to be bailed out
Ireland style.
Now, the monetary economy of tarp i is simple:
mv=pq,
more m, given v/q constant, means only more p,
we all know q is collapsing in the US
because of (g - t) caused too much (m - x)
as m-x was funded by b*
now the foreign holders of b wants a lot more i
you can get domestic b with a low i
but as p is going to the moon,
your i/p will go to hell if you not fix
g - t = 0 with a very positive x-m
t is reduced by tarp 1
and g is increased,
so more m and less x
more money for China and the Gulf
to fund those bonds.
I doubt booze and pawn shops will be long... Buggy whips... Emm... Lots of horse manure in Washington DC, that's for sure...
See the markets? What an absolute joke. Those SOB's got what they wanted and now it's take the money and run. I'm totally convinced, given everything we know today, that Congress would vote in favor of the Iraq invasion and the Gulf of Tonkin Resolution all over again... Sorry bunch of losers... All this for $10 billion in pork. Vote these scumbags out.
Paul: How right you are! These losers in Congress are already talking bailout II. The ink wasn't even dry off the first bill!
Wooooo! The rally on Wall Street after the vote just goes on and on... Look at all the confidence that Bush-Paulson brought to the market.
Well Smarty_Pants, gotta go pawn my computer so I can buy some gas for my car... Eh! That is if the gas station has some gas today...
If they are using linear formulas where calculus should be used, no wonder Wall Street is already tanking after the bail out. They are fixing ancient history with a 1930's tool box.
Jeeze... Stocks free fall near the close... Looks like "Curbs-In"
FED-ZILLA
(With apologies to Blue Oyster Cult)
With a low rate teaser and no money down
He watches the overreached home-owners drown
Helpless investors seeking stock market gains
Scream as the Nasdaq plunge brings them pain
He picks up a bank and he throws it back down
As the Congressional bailout hands him his crown
Oh no, replace that CEO
Go go FED-zilla, yeah
Oh no, the debt just has to grow
Go go FED-zilla
FED-ZILLA!
Problem was that all your money was in the bank when it failed in 1929 and you never got it back. Bargains weren't much use if you lost everything.
My great-grandparents lost their farm for that very reason. Bank went under, all deposits/savings lost, mortgage sold to another bank who demanded payment and eventually foreclosed.
Today the government will tell you "it's different" because you FDIC insurance. Well, the only way to return your money if your banks folds is to print it up, which counteracts the deflationary forces that brought prices down in the 30s.
Prices dropped in the 30s because when the debt bubble imploded people lost their savings and the money supply shrank. Not so today. Don't expect a repeat.
More like FID
finger in dike
can you say "knee capping" anyone if GE doesn't pay up??
As for you Stone Fox Capital, don't just talk about it incessently, get out there and start snapping up those bargains with Warren. Trouble is mate, you won't be getting the bargain prices and sensational deals he's getting because those are strictly reserved for multi-billionairs in the Land of Opportunity. Also don't listen to any of the comments from the Oracle from Omaha because they are every bit as negative as anything you'll read here.
Heads I get billions in warrants, Tails I get my money back with 10% interest.
Mountain Fist: cigarettes first, easier to trade in small amounts