M-P

Why the Dow Is Headed to 6000

I would tend to agree w/ this piece ... the savings rate is only going up, esp. w/ the unemployment picture and threat of downsizing ... the top-line picture does not look good for many firms ... you can only slim-fast your way to EPS growth for so long. I'm not sure on the 6000, but the market is over-extended and was clearly looking for anything to rally on ... the additional regs and tax hits will only slow hiring in my mind ... EMEA is clearly not well - the global picture is not great - UK, Germany, Spain, etc. have more to de-leverage and soak up - the over-capacity story is strong across the globe.

What Shape Will Recession Take?

I see an L or lazy W type recovery. I believe that consumption patterns will be muted and that there will be more savings. Most people remember the immediate past - it's more available and accessible to them cognitively (see behavioral finance literature). I'm thinking that for the next few years, many people will take on less leverage and save a bit more. As inflation starts to show its face, the economy will need to be slowed a bit and a "V" like trajectory will be at a lesser slope. After a few years, all bets are off in terms of moving to the apex of another bubble. Hopefully, we will have learned some lessons around leverage, risk, and unintended consequences.

Still Waiting for a Real Bottom

This piece has a lot of good points. We do need to re-base, but I don't hold out a lot of hope that we will somehow learn from this bubble or series of mistakes and avoid one the next time. We often move from bubble to bubble as we hit the apex of the business cycle ... the pedulum swings and over-corrects. I think '09 will be a tough road with credit card debt, option ARM's, overall de-leveraging, employment challenges, and a global recession that will hurt exports. A government/taxpayer injection will help, but it's not going to rightsize the structure or excesses that will need to change and be unwound. Today's solutions are tomorrow's problems.

Is It Time to Buy? What History Shows

I think we are in a bear rally personally ... it's not a "free" market at this point ... it has a major governmental overhang that is changing the dynamics, which is why it's hard to play. One reason the market was up after the 533K job loss figure is that everyone thought it was bad enough for the government to step up the auto bailout and the fill-in-the-blank bailout. The credit card shoe will fall in the next few months, along with numerous other credit lines ... the government can create jobs, but it will take some time before the major corporations start hiring again - also, look at the wage delta between jobs lost and jobs created ... financial services jobs pay at the top of the scale - public works jobs do not. Add-in the delevering piece and I think we will challenge previous lows.

A Bad Day, Yes, But Enough with the Hyperbole

Agree w/ a number of comments here. The story of why it's a crisis and the root causes is a little convoluted. At the end of the day, many of the institutions had too much leverage - see the waiver around the net capitalization rule in '04 - too much opaque derivative exposure (CDS's and it's breathren), and too much correlated risk (one domino falls, and ...). Look at the increadible rise of the derivative market over the last 10 years. Look at the same rise in sub-prime. I think we need to do something - and we have been - I'm just not convinced it's 700B and/or the players really know their exposures and root causes.

When It Rains, It Pours

You have to love the Fishman story ... it's emblematic of the whole rotting corpse. The average business professional makes $3-4M in a lifetime (salary, bonus, etc.). I'm all for pay-for-performance, but pay for malfeasance and non-performance is wrong. The bailout vs. workbout goes against everything we teach our children and what firms try to instill in their employees. Own up to your responsibilities and take some accountability for your actions. The bailout mindset is like a virus that eats away at personal responsibility and blows-up the whole risk-reward profile that finance is based on. The moral hazard is ripe and smells bad. Too much leverage + too many exotic derivative instruments + too much living beyond one's means = a poor outcome.