it is difficult to say where things are heading from here. it is definitely not over. we start year two of the crisis with the collapse of 3 major players, FNM, FRE, LEH. plus just in time sale of MER. plus AIG bailed out. two questions: who is next? i would suppose there will be a small series of small players going belly up and firesold to competitors in both banks and insurers. not because of recent bancruptcies, but for the same reason they got caught. i believe many insurers will be forced to show what is going in their hold to maturity portfolios. and their will be plenty of structured credit. second the oil price plays a crucial role in everything IMO. it is the only thing that can keep inflation low and the tools for the central banks in place. i am astonished by the strong dollar and relatively weak gold. and if there was any way to short the fed, i'd love to do that. what was missing in the crisis so far was the infamous blood on the street. now there is. on wall street itself it can get hardly worse. a new order of things is coming there. i could believe that the current levels make banks an attractive buy. the insurance sector might have the worst still ahead. broad index wise the next two years are at (very) best sideways. the VIX seems to find a center of peace pretty sharp at 20, with some unrest lifting him to 25 and anxiety to 35. just some thoughts. please share yours, but stay at topic if possible. thnx.
What I find interesting is that the major calamities in recent weeks - unlike 1990 - seem limited to big cap financials/banks/brokers. The KRE (regional bank) ETF is up 61% from its July panic lows and now down a mere 0.8% YTD.
puzzles me too. i can't believe we will not see a chain of reactions. maybe even months from now. defaults in smaller caps must go up IMO. weird, if this was a big-cap-crisis only ... yet i am not sure if we necessarily see all the activity that is going on. we saw different regional US banks belly up and swallowed by others. it could be that in other sectors, which were not so much in the spotlight, we (at least) simply don't know.
great link. the article perfectly illustrates the difference between LEH and AIG. the interesting thing with AIG is that on the one hand nothing has happened. i wonder what their rating will be since they are now a public institution ... cant be any less than AAA i guess. so all the pressure on this side has evaporated. needless to look at anything AIG related anymore. this is now a branch of the US government. the real issue who is next, since the AIG problem is the first big question mark behind a whole bunch of insurances, who (at least i guess so) have tons of weak credit on their books. i am not an expert, but the impact of insurances on the consumer is different from a bank. privates will not stampede into the offices. nevertheless the indirect effect, as pointed out in the article, could be even worse. but that is probably limited to the top houses, which by no means must go belly up. governments around the globe will save the major insurance corporations, but will not care about small and medium ones. that means big increase in public debt. if all this does not spell world wide recession what could?
the market gets rid of wall street. the end of capitalism as we know it. will not happen. just happened.