Well with the G7 pretty much locked down everything and pledging their currencies it looks like there will be no further collapses. We had no major failures in the USA in the last week. MS will probably get the Mitsubshi deal under worse terms but they will not fail. The CDS Auction for LEHMAN showed that everything was being marked down during the downturn and the final writeoff showed no major suprises. In addition there is now a floor of around 8 cents on the dollar on the CDS If your a shitty bank you got to love the idea of Paulson being a silent partner and give you the guns to take out your honest competition. Gold and Silver are not going anywhere. If Gold couldnt break 1K with the world on fire in the last two weeks its not gonna happen. I was very concerned 10 days ago that a major bank run was a remote possibility. I think now its highly unlikely. The recession is still too come, and of course higher taxes, higher costs but the death spiral in the markets its probably close to the end. I don't know if we have hit a total market bottom, but I don't think the financial system is going to fall into the abyss this year. Anyone think I am nuts on this.
this crisis is by no means over. there is still massive amounts of debt and leverage in the system. the credit bubble has only begun to implode. also, u.s. govt debt is quickly approaching 100% of gdp. i'm not trying to sound pessimistic...it's just reality.
Next step is de-correlation of assets and asset classes. In the past week, pretty much all world indicies dropped the same amount, measured in US dollars. Most stocks dropped roughly the same amount as well. The next phase will be to seperate true value, from fluff. It wouldn't surprise me to see certain financials take a huge hit (RBS, HBOS, and whatever else is probably insolvent), while, for instance, the energy sector should see huge gains.
Hyperdeflation is usually followed by hyperdeflation. Hyperdeflation, as in, what happened last week, to wipe out the banks and the ability of the public to hedge. Hyperinflation to re-align the amount of paper wealth in the world to the amount of physical wealth available. I happen to think technology will do quite well in the future as well. Certain kinds of technology firms, not firms that are 100% dependant on consumer advertising or who have intrinsically flawed revenue models. Those will always destroy value in the long run.
Everything will be fine - Joe Sixpack should be able to get a loan against equity on his house by the end of the week. The $25,000 cash backs on closing might take until the end of next week, but after that everything will be just like it was before.
I agree in general that this will happen, but we may not be there yet. I just went from 90% cash to 20% cash after being mostly cash for months. I may be too early, but I do think last week was the peak of the fear. There may still be a lot of unwinding that needs to happen. Really good companies got slaughtered not because they had problems, or the economy had problems, but because the cash that owned the shares went away in many cases and because of general market fear. I'm really happy with the values I picked up even if I have to take another 20% hit from here. This is all long term money, so I'm figuring I'll either make a killing in the next few years or be in a soup line with everyone else. I'd like the chicken soup, please.
Exactly. I have little doubt that central bank lending and government guarantees of deposits will help financial markets in the days and weeks to come. But unless these banks receive injections of equity, the problem is not being solved. There are too many banks that are overleveraged. Which means that the guarantees will be required, which means currency debasement.