I wonder if another reason you are seeing a major collapse in equities is due to the fear of the government coming in and wiping out or diluting equity. Think about it, why would a long term investor buy something with the fear that if they get one cent from the government or any kind of aid that the common would get wiped or diluted massively. I think such fears are probably at the back of investors and this is why they are pulling out as well. There is so much uncertainty and the never ending message from the white house is scaring the shit out of your average investors. The biggest destroyer of equity value is total uncertainty and the continuing risk of a black swan event which seem to happen on a more common basis.
Up until a few days ago I thought Obama was a rookie and didn't really know what he was doing. I have come to realize the mans ultimate goal is for the stock market to go down every God damn day until mom and pop are begging him and pelosi to take what is left of their 401ks and give them a set return. Obama is waiting for the common man to say Uncle. I fear for my children, this guy scares the hell out of me.
Absolutely. Equity holders are being thrown under the bus at the expense of bondholders. Why buy equity when you can purchase the debt, collect income and protect yourself by means of CDSs? The government is simply manipulating the capital structure in an attempt to keep zombie institutions afloat. Unfortunately, this type of initiative gives little room for companies holding large amounts of debt to deleverage their balance sheet, because the equity is already trading at very depressed levels. Thus making the situation worse instead of better. One can only hope that those bozos in Washington will eventually get the point...
Kingofshorts: This is similar to my post that discusses banks whose TARP investment is greater than their market cap: http://www.elitetrader.com/vb/showthread.php?s=&threadid=148766&perpage=6&pagenumber=2 http://seekingalpha.com/article/122514-pinpointing-the-most-attractive-tarp-investments?source=yahoo
The overall equity market is on a straight shot down because the latest fiscal and economic measures provide no investor confidence at all. Look closely at the measures and you will see that the Federal government is putting money in one pocket while taking out from the other pocket. Geithner and the Treasury have yet to announce a detailed plan to rescue the banks. They have absolutely no idea on how to effectively approach the problem.
William Poole argues the same point... âCreditors are being bailed out everywhere but equity owners are not,â said William Poole, president of the St. Louis Federal Reserve Bank until March 2008. âWhat that does is create cascading weakness because you canât raise any equity capital.â http://www.gurufocus.com/news.php?id=50517
He has a plan. He is not here by accident. But you know we get what we deserve. I don't hate Obama..I hate the people who voted for him. He was very open about his intentions and his record was there.
until mom and pop are begging him and pelosi to take what is left of their 401ks and give them a set return. Bingo! You've nailed it, JD!
uh dumbass equity holders are last in line in the event of a default or near default so of course they are going to be thrown under the bus
Irm, this is my favorite quote from Friday's WSJ Opinion section: New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president's budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government. Obama's Radicalism Is Killing the Dow - Opinion Page, WSJ 3/6/09