Bank Bailout, Stimulus and the Market
So I listened to Tim Geithner, Obama's Treasury Sec'y, and I still have no idea what the bank bailout plan will do. And later today the administration put out a release claiming the devils details will be in the soup in a few more weeks. All I can say is that one gets the idea in her head that things with the banks are far more serious than we are being told, like uh, banks are insolvent, period! And we don't know what to do, but we gotta do something. Paul Krugman on the News Hour with Jim Lehrer says, "let us look at the books". I say, you're crazy and the image of me running down the road screaming with my hair onfire is keeping me up at night. The truth is twofold:
a) yes banks are insolvent due to derivatives that have no value whatsoever and there is so much more that we don't even know about cause they don't even know what they don't know; and
b) banks who issued mortgages for $500,000, are now stuck with no one making mortgage payments on a house thats now worth $300,000 (if that) cause they lost their job and what the heck anyway.
The system is broken alright, it literally cannot withstand anymore writedowns/losses because any lower is in China. That nationalization is starting to look, CLOSER...
Read this It Is Time to Nationalize Insolvent Banking Systems
Nouriel Roubini | Feb 10, 2009
The stimulus passed in the senate and now goes to conference. Republicans claim their plan creates more jobs, (if RNC chair Steele's Sunday This Week interview on what a job isn't is any indication then I ask,"whats in a job," and please, thanks but no thanks.) Go here to watch...
Alot of good things have been taken out and other great things were not put in at all. Obama needs to just walk all over Congress, where's Bush when you need em? David Leonhardt's article in the New York Times Magazine called The Big Fix, is a must read for Obama and any economist with half a brain. Oh yeah, I forgot. Economists have no brains, which is why we are here in the first place, but thats another story.
So essentially, we are stuck in limbo and Mr. Market, who is not only efficient, but fair (hence Bear Stearns $2 share price), will have another two weeks to redeem himself in the midst of all this inefficiency. Can't a trader get a break you ask? Well yes. Opportunities abound on every pullback, provided you have the stomach for the ride.