you_can_call_me_Al

Lehman Bankrupt, Merrill Swallowed, AIG Wilting: What It All Means

Jason, thank you. You are completely correct. When there is a run on the banking system, you don't stand by and let the invisible hand slap the shit out of you. Similarly, you don't let it pick up a weapon and shoot your family, your neighbors, and their dog. You get creative and do whatever you must to stop the contagion from spreading.

Lehman Bankrupt, Merrill Swallowed, AIG Wilting: What It All Means

1) Yes, the sky appears to be falling at market bottoms, but that doesn't mean we're at the bottom because the sky appears to be falling. Things look terrible halfway to the bottom too.

2) Crude hit a low because the economy is tanking. Lowering a price from "totally unaffordable" does not make it cheap.

3) The current PE depends on the P AND the E. 14X is still high by historical standards, and if you don't believe the earnings will hold (and I don't), then it's really a higher ratio than you think.

4) The economy is not growing at a 3.3% clip. The number is complete, well, ...bullshit. They used a fictitious inflation number. If you really think the economy is growing that robustly, then maybe you should look out of a window.

5) The dollar is not rebounding against other currencies, they are falling to our level because their economies are also slowing (that's bad for us). Having everyone fall down after you doesn't mean you got back up.

A recovery will come (oh sorry, I forgot we're not in a recession), but that requires business expansion, which requires loans, which requires that most members of your financial sector not be fighting for their survival. The recovery will come, but it will be awhile.

Think about it. Fannie and Freddie have effectively been nationalized, 100+ year old firms are going belly up, housing continues to fall, the Fed is low on dry powder, we're still involved in two expensive wars, the global economy is slowing (not bottomed, SLOWING), consumers are in debt up to their eyeballs, and, most importantly, the financial firms that fuel recoveries DON'T HAVE ANY CASH.

We are not close to the bottom. Hate to sound negative here, but please. Just because everyone knows something is obvious doesn't mean they're wrong.