It's amazing how much negativity there is these days... life is not about easy decisions, its about making the right decisions.
Fight every battle on principle and you will lose the war. Win the battle on sound logic and reasoning and you will have enough time later to debate and preach how the future should be shaped. Lose the war, you are left with nothing.
"Europe’s leaders must have been snoozing in the back row when the teacher conducted the TARP review class," Caroline Baum says. Just as the problem with U.S. banks was quality of credit, not access to credit, “extending more credit to (European) nations that can’t service their accumulated debt won’t make them more creditworthy." [View news story]
The TARP was based on the hypothesis that the banks who receive the liquidity will use it to boost lending which has been constrained for small businesses and the likes -- at least, in the public eye. What the TARP did do, however, was something much more different but still managed to accomplish something in the net positive -- the Banks, instead of lending the cash out, held onto it in case of their own liquidity needs. What the public doesn't seem to understand is, this scenario was the most probabilistic at the time and the founders of it knew it.
The general conclusion was, whatever the banks did with the money -- hold onto it or lend it out -- the money would prevent any large scale bank collapses. This would reintroduce some confidence back into the banking sector over time, reducing bank-to-bank (counterparty) risk and unfreeze the capital markets. This helped corporations regain their ability to raise and roll their bonds just-in-time to prevent wide spread capacity destruction and corporate bankruptcies.
The most optimistic scenario involved small businesses also regaining access to capital in the short-term, but clearly this has not been the case. However, this is slowly unfreezing about a year later.
The TARP's biggest positive is the timing and prevention of total financial collapse. It couldn't save everyone, but it did save a lot despite the negativity surrounding its inability to help small businesses.
Just imagine the different landscape we'd be seeing if TARP wasn't created... NO small businesses will be around, period.
Do people even know what a swap is? This one liner makes it seem like the US simply gave up money - this is not the case. The US received an equivalent sum of Euros, which it will hold, and pay back with interest in the future when the US dollars are also returned.
Monday's 405-point Dow gain was one of only 16 such rallies, all of which coincided with bubble burst - 12 when the credit bubble popped, and the other four a decade earlier when tech imploded. "In other words," David Rosenberg writes, "the most valuable information contained in last week's intense volatility, underscored by the 400-plus point bounce in the Dow, is that it's time to take chips off the table." [View news story]
Talk about narrow minded.
A better way would be to identify what factors caused the market jumps, their relative momentum, and whether we are approaching new highs or not. The recent market jump was a "relief rally" from significant equity weakness over the past few weeks due to the European Credit Crisis -- which is still ongoing and will continue to be for a while.
To say that we are in a bubble when we are 30% below previous highs (on average, many stocks are much below their 2007 peaks with relatively lower current and forward P/Es) and with the general economy showing signs of recovery seems rather unwarranted.
If this is the sole argument from Mr. Rosenburg that we have reached a turning point, I'd like to tell him to come back when the SPX hits the 1550 mark.
If the argument is whether the stock market recovery is warranted based on current and projected economic forecasts, that is another story. If Rosenburg's conclusion comes out correct, it'd be because of this specific argument, not on the analysis he has pointed out.
With Asian markets set to open, the EU is scrambling against a self-imposed deadline to roll out a coordinated defense plan for the euro that reportedly comes to €560B total ($724B). Updated 8:22 p.m.:Live press conference has begun, a few hours late. Reuters reports a €500B package, a mix of loans and loan guarantees. The Nikkei opened flat to slightly higher (+0.3%) before news began to break. Euro +1% against the dollar. [View news story]
I'm trying to figure out why anyone is red thumbing my reply to ebworthen. I am merely pointing out what this decision was based on; not the ethics behind it.
What I am concerned about is no different from all of you -- the sovereign debt is soaring to enormous levels and it is difficult to see if, when, and how it can come down.
Make no mistake, the only way the debt level can come down is with extraordinary economic growth that outpaces deficit growth or through painful tax increases.
The important point to remember is that the bailout was meant to calm the markets, and the initial reaction has been positive. In effect, it has done its jobs. The main hope of this bailout fund is that it is never actually used -- it is simply a commitment that there is a huge fund to prevent speculators from plunging the world into any kind of liquidity driven chaos we experienced in 2008.
With Asian markets set to open, the EU is scrambling against a self-imposed deadline to roll out a coordinated defense plan for the euro that reportedly comes to €560B total ($724B). Updated 8:22 p.m.:Live press conference has begun, a few hours late. Reuters reports a €500B package, a mix of loans and loan guarantees. The Nikkei opened flat to slightly higher (+0.3%) before news began to break. Euro +1% against the dollar. [View news story]
This is no longer about Greece. It is about containing and limiting the damage from Greece and preventing it from creating a global liquidity crisis that we saw in 2008.
The fact of the matter is, considering this a bailout of one or a few nations is rather narrow. You need to look beyond the direct effects and look more closely at the indirect effects. If you let credit markets freeze up, the immediate cost is fear contagion and rapid equity market chaos. Considering the equity markets is a "leading indicator" of economic activity, this sudden drop, despite it having little to do with actual economic growth, translates into a self-fulling prophecy -- the economy is jolted, it reacts to what the markets are implying, and economic growth comes to a screeching halt. Meanwhile, everyone one of our pensions are negatively affected and seemingly unrelated (from the Greek credit crisis) people begin to lose their jobs and unemployment skyrockets.
Wake up, sir.
This is not about you financing a bailout of the Greek people -- It is a payoff to prevent greater harm on everyone. Although it seems like we are rewarding Greece for their sub-par abilities to manage their fiscal situation, it is all about cost vs. benefit -- or in this case, the benefit is limiting further cost.
If only Life was fair and it was all about making easy choices.
With Asian markets set to open, the EU is scrambling against a self-imposed deadline to roll out a coordinated defense plan for the euro that reportedly comes to €560B total ($724B). Updated 8:22 p.m.:Live press conference has begun, a few hours late. Reuters reports a €500B package, a mix of loans and loan guarantees. The Nikkei opened flat to slightly higher (+0.3%) before news began to break. Euro +1% against the dollar. [View news story]
What has surprised most is the speed at which this emergency fund has been coordinated and created -- over one weekend. The sad truth is, I also believe the market did not price this in last week -- when, in fact, with every passing day of Euro currency attacks, the probability of this should have risen.
This should, at the very least, provide a significant short-term boost to credibility and perception of unity for the EU. Whether this will translate into a long-term stabilization of the fear that has choked the global capital markets .... time will tell.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
I believe you are missing the underlying message of the bailout.
The bailout is framed as a way to help Greece, but the real reason is for the prevention of Greece's situation impacting everyone else who shares the same currency. The EU nations gathered and decided the bailout was a small price to pay compared to what could happen if its not given.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
Even if the US shares similarities with the Greek situation on a factor by factor basis, you are overlooking a huge benefit to the US -- all of their external debt is denominated in their own currency.
The most likely result of the US' fiscal mismanagement is deep currency devaluation, not default or bailout by its neighbours of any kind.
Greece accepts an unprecedented bailout from the eurozone and the IMF. The rescue package is valued at more than €100B ($133B), with an exact figure to be announced later today. [View news story]
At this stage in the game, whatever minor details the opposition want amendments to will NOT be worth the impact of not putting an end to this fiasco immediately.
When your basement springs a leak, there needs to be no debate on how best to plug the hole. You plug it first with whatever you have, then your figure out how best to seal it permanently. You do not have the liberty of time to sit around debating what medium to use -- the more you wait, the more flooding and bigger the hole; at some point, you'd have run out of time to do anything and your basement will be engulfed with water.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
Michael Clark, This has nothing to do with bankers. It has all to do with utterly terrible fiscal management by the Greek governmental authority. At the same time, it's very difficult to discount any wrongdoing by the Greek citizens themselves -- they voted them in and they also vastly supported the immense spending without consideration for the mounting budget deficit.
To protest now out on the streets is rather unfortunate and far too late to make any significant impact on the current situation -- that is, Greece has no choice but to make hugely unpopular decisions to keep them afloat. The people, I'm sure, will vote the current government out-of-office in the next election; but it will be more of a scape-goat driven action.
What we witness today is simply the byproduct of failed fiscal management, failure by the people to make a change when they could have, and ultimately, a milestone and start of a new difficult era.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
The Greek people will lose one way or another. They either: 1. Live with the Austerity measures or 2. Prevent the Greek government from doing what is necessary to protect what is left of it and plunge into the Abyss
If Greece only cares about itself, it can default on its debt -- No Debt! At the same time, with no credit to fund its budget deficits, a huge government workforce and very poor economic output... it will be synonymous to pressing the reset button back to the stone ages
Austerity measures will be hard to bite, but it will at least get the government fiscal situations back under control. It also will not seize capital market opportunities and its options will be more open. It will be more synonymous to a depression.
Support for a global bank tax to cover the cost of future financial crises appears to be losing steam after a weekend of high-level discussions. Although the U.S., Germany, France and the U.K. still support the idea, Canada, Australia and Japan are firmly opposed. [View news story]
Bank Bailout Tax... Why don't we also create a Lose a Job Tax, Get Ill Tax, Can't Fund Your Own Retirement Tax... wait, we have all of those already.
The problem with all of these taxes is that, if the individuals most affected by it have the knowledge, the means and the discipline to execute a plan to protect themselves from such events, they will not be necessary.
The Government loves to take a psychologically damaging event to the public and put in place an inefficient mechanism to protect a few at the cost of many.
I would be much more in support of a disciplined mechanism to prevent a bailout (i.e. stricter capital controls and risk management) versus taxing FOR a bailout -- are we implying that there will be one? And if there is one, will the fund be enough?
A lot of uncertainty for something that is supposed to prevent another near financial collapse.
Optimism is back and dealmaking is coming, JPMorgan Chase (JPM) chief of investment banking Douglas Braunstein says. Access to capital and the cost of capital has never been better, and corporate America has almost $1T in cash on its balance sheets, he says. Calls from corporate clients discussing deals have “increased dramatically in the last several weeks.” [View news story]
Jason,
Based on your numbers, you imply that Corporate America is in a poor financial position. I completely disagree. If anything, it is Corporate America that continued to remain relatively stable given the economic mess we have and continue to go through.
The real problem is not Corporate America's financial position, its the citizens of the United States that have experienced rapid wealth deterioration as home prices plunged across the country. With asset prices plunging, equity of homes have dropped significantly while the debt proportion (mortgage) has remained relatively the same. If we assume even an aggressive equity number of 60% of market value of homes in 2005, with the 30% drop in home prices from the peak -- lets say 20% from 2005 prices -- The debt to equity of the home (asset) has gone from approx. 67% in 2005 to 100% in Q4 2009.
And even without that daunting simple statistic, I would much rather put my money with Corporate America that controls the employment and income of the people who pay for the homes they have borrowed to pay for.
The Fed had lent $9.2B to foreign central banks as of Wednesday, after reviving its swaps program over the weekend in conjunction with the EU's rescue plan. [View news story]
Fight every battle on principle and you will lose the war.
Win the battle on sound logic and reasoning and you will have enough time later to debate and preach how the future should be shaped.
Lose the war, you are left with nothing.
"Europe’s leaders must have been snoozing in the back row when the teacher conducted the TARP review class," Caroline Baum says. Just as the problem with U.S. banks was quality of credit, not access to credit, “extending more credit to (European) nations that can’t service their accumulated debt won’t make them more creditworthy." [View news story]
The general conclusion was, whatever the banks did with the money -- hold onto it or lend it out -- the money would prevent any large scale bank collapses. This would reintroduce some confidence back into the banking sector over time, reducing bank-to-bank (counterparty) risk and unfreeze the capital markets. This helped corporations regain their ability to raise and roll their bonds just-in-time to prevent wide spread capacity destruction and corporate bankruptcies.
The most optimistic scenario involved small businesses also regaining access to capital in the short-term, but clearly this has not been the case. However, this is slowly unfreezing about a year later.
The TARP's biggest positive is the timing and prevention of total financial collapse. It couldn't save everyone, but it did save a lot despite the negativity surrounding its inability to help small businesses.
Just imagine the different landscape we'd be seeing if TARP wasn't created... NO small businesses will be around, period.
The Fed had lent $9.2B to foreign central banks as of Wednesday, after reviving its swaps program over the weekend in conjunction with the EU's rescue plan. [View news story]
Monday's 405-point Dow gain was one of only 16 such rallies, all of which coincided with bubble burst - 12 when the credit bubble popped, and the other four a decade earlier when tech imploded. "In other words," David Rosenberg writes, "the most valuable information contained in last week's intense volatility, underscored by the 400-plus point bounce in the Dow, is that it's time to take chips off the table." [View news story]
A better way would be to identify what factors caused the market jumps, their relative momentum, and whether we are approaching new highs or not. The recent market jump was a "relief rally" from significant equity weakness over the past few weeks due to the European Credit Crisis -- which is still ongoing and will continue to be for a while.
To say that we are in a bubble when we are 30% below previous highs (on average, many stocks are much below their 2007 peaks with relatively lower current and forward P/Es) and with the general economy showing signs of recovery seems rather unwarranted.
If this is the sole argument from Mr. Rosenburg that we have reached a turning point, I'd like to tell him to come back when the SPX hits the 1550 mark.
If the argument is whether the stock market recovery is warranted based on current and projected economic forecasts, that is another story. If Rosenburg's conclusion comes out correct, it'd be because of this specific argument, not on the analysis he has pointed out.
With Asian markets set to open, the EU is scrambling against a self-imposed deadline to roll out a coordinated defense plan for the euro that reportedly comes to €560B total ($724B). Updated 8:22 p.m.: Live press conference has begun, a few hours late. Reuters reports a €500B package, a mix of loans and loan guarantees. The Nikkei opened flat to slightly higher (+0.3%) before news began to break. Euro +1% against the dollar. [View news story]
What I am concerned about is no different from all of you -- the sovereign debt is soaring to enormous levels and it is difficult to see if, when, and how it can come down.
Make no mistake, the only way the debt level can come down is with extraordinary economic growth that outpaces deficit growth or through painful tax increases.
The important point to remember is that the bailout was meant to calm the markets, and the initial reaction has been positive. In effect, it has done its jobs. The main hope of this bailout fund is that it is never actually used -- it is simply a commitment that there is a huge fund to prevent speculators from plunging the world into any kind of liquidity driven chaos we experienced in 2008.
With Asian markets set to open, the EU is scrambling against a self-imposed deadline to roll out a coordinated defense plan for the euro that reportedly comes to €560B total ($724B). Updated 8:22 p.m.: Live press conference has begun, a few hours late. Reuters reports a €500B package, a mix of loans and loan guarantees. The Nikkei opened flat to slightly higher (+0.3%) before news began to break. Euro +1% against the dollar. [View news story]
The fact of the matter is, considering this a bailout of one or a few nations is rather narrow. You need to look beyond the direct effects and look more closely at the indirect effects. If you let credit markets freeze up, the immediate cost is fear contagion and rapid equity market chaos. Considering the equity markets is a "leading indicator" of economic activity, this sudden drop, despite it having little to do with actual economic growth, translates into a self-fulling prophecy -- the economy is jolted, it reacts to what the markets are implying, and economic growth comes to a screeching halt. Meanwhile, everyone one of our pensions are negatively affected and seemingly unrelated (from the Greek credit crisis) people begin to lose their jobs and unemployment skyrockets.
Wake up, sir.
This is not about you financing a bailout of the Greek people -- It is a payoff to prevent greater harm on everyone. Although it seems like we are rewarding Greece for their sub-par abilities to manage their fiscal situation, it is all about cost vs. benefit -- or in this case, the benefit is limiting further cost.
If only Life was fair and it was all about making easy choices.
With Asian markets set to open, the EU is scrambling against a self-imposed deadline to roll out a coordinated defense plan for the euro that reportedly comes to €560B total ($724B). Updated 8:22 p.m.: Live press conference has begun, a few hours late. Reuters reports a €500B package, a mix of loans and loan guarantees. The Nikkei opened flat to slightly higher (+0.3%) before news began to break. Euro +1% against the dollar. [View news story]
This should, at the very least, provide a significant short-term boost to credibility and perception of unity for the EU. Whether this will translate into a long-term stabilization of the fear that has choked the global capital markets .... time will tell.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
The bailout is framed as a way to help Greece, but the real reason is for the prevention of Greece's situation impacting everyone else who shares the same currency. The EU nations gathered and decided the bailout was a small price to pay compared to what could happen if its not given.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
The most likely result of the US' fiscal mismanagement is deep currency devaluation, not default or bailout by its neighbours of any kind.
Greece accepts an unprecedented bailout from the eurozone and the IMF. The rescue package is valued at more than €100B ($133B), with an exact figure to be announced later today. [View news story]
When your basement springs a leak, there needs to be no debate on how best to plug the hole. You plug it first with whatever you have, then your figure out how best to seal it permanently. You do not have the liberty of time to sit around debating what medium to use -- the more you wait, the more flooding and bigger the hole; at some point, you'd have run out of time to do anything and your basement will be engulfed with water.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
This has nothing to do with bankers. It has all to do with utterly terrible fiscal management by the Greek governmental authority. At the same time, it's very difficult to discount any wrongdoing by the Greek citizens themselves -- they voted them in and they also vastly supported the immense spending without consideration for the mounting budget deficit.
To protest now out on the streets is rather unfortunate and far too late to make any significant impact on the current situation -- that is, Greece has no choice but to make hugely unpopular decisions to keep them afloat. The people, I'm sure, will vote the current government out-of-office in the next election; but it will be more of a scape-goat driven action.
What we witness today is simply the byproduct of failed fiscal management, failure by the people to make a change when they could have, and ultimately, a milestone and start of a new difficult era.
Greeks take to the streets in protest of the country's austerity measures, calling for job security and railing against "unprecedented" budget cuts, as the eurozone and IMF move towards finalizing a €120B ($159B) rescue package. [View news story]
They either:
1. Live with the Austerity measures or
2. Prevent the Greek government from doing what is necessary to protect what is left of it and plunge into the Abyss
If Greece only cares about itself, it can default on its debt -- No Debt! At the same time, with no credit to fund its budget deficits, a huge government workforce and very poor economic output... it will be synonymous to pressing the reset button back to the stone ages
Austerity measures will be hard to bite, but it will at least get the government fiscal situations back under control. It also will not seize capital market opportunities and its options will be more open. It will be more synonymous to a depression.
Depression vs. Stone Ages
They can choose.
Support for a global bank tax to cover the cost of future financial crises appears to be losing steam after a weekend of high-level discussions. Although the U.S., Germany, France and the U.K. still support the idea, Canada, Australia and Japan are firmly opposed. [View news story]
Why don't we also create a Lose a Job Tax, Get Ill Tax, Can't Fund Your Own Retirement Tax... wait, we have all of those already.
The problem with all of these taxes is that, if the individuals most affected by it have the knowledge, the means and the discipline to execute a plan to protect themselves from such events, they will not be necessary.
The Government loves to take a psychologically damaging event to the public and put in place an inefficient mechanism to protect a few at the cost of many.
I would be much more in support of a disciplined mechanism to prevent a bailout (i.e. stricter capital controls and risk management) versus taxing FOR a bailout -- are we implying that there will be one? And if there is one, will the fund be enough?
A lot of uncertainty for something that is supposed to prevent another near financial collapse.
Optimism is back and dealmaking is coming, JPMorgan Chase (JPM) chief of investment banking Douglas Braunstein says. Access to capital and the cost of capital has never been better, and corporate America has almost $1T in cash on its balance sheets, he says. Calls from corporate clients discussing deals have “increased dramatically in the last several weeks.” [View news story]
Based on your numbers, you imply that Corporate America is in a poor financial position. I completely disagree. If anything, it is Corporate America that continued to remain relatively stable given the economic mess we have and continue to go through.
The real problem is not Corporate America's financial position, its the citizens of the United States that have experienced rapid wealth deterioration as home prices plunged across the country. With asset prices plunging, equity of homes have dropped significantly while the debt proportion (mortgage) has remained relatively the same. If we assume even an aggressive equity number of 60% of market value of homes in 2005, with the 30% drop in home prices from the peak -- lets say 20% from 2005 prices -- The debt to equity of the home (asset) has gone from approx. 67% in 2005 to 100% in Q4 2009.
And even without that daunting simple statistic, I would much rather put my money with Corporate America that controls the employment and income of the people who pay for the homes they have borrowed to pay for.
This is unfortunate, but it is also the Truth.
Greek Bailout Finalized [View article]
themselves - its called fiat money.