Tuesday, January 22, 2008
Market Volatility : Let the bad times roll.
Well the recent recent volatility will be nothing compared to what will happen if the monolines go under.Imagine the whole of the developed world selling most of the bonds they own and most of the world's banks balance sheets severely distressed.The near dooms day scenario is a bit like every bank with write offs like Merrill without the sovereign wealth funds to help them out.Nasty huh?
The Fed's emergency rate cut today was laughable.What on earth will lowering interest rates do in a world where trust has broken down.Banks aren't lending to each other,not because of lack of liquidity/cost,but lack of trust.Guess what, money can't buy trust.A novel concept.
Sadly Mr Bernanke's only trying to fix the mess his predecessor,Mr Greenspan made.50 years from now Greenspan will be remembered for one thing only.As the Central Banker who precipitated the conditions for the worst asset inflation bubble for a century for no apparent reason.He has now joined a hedge fund,Paulson & Co, specialising in essentially selling sub-prime short.It's the opposite of a virtuous circle.A vicious cycle.
Assuming deteriorating US corporate earnings,high unemployment,poor consumer confidence and impaired bank balance sheets,then the conditions for a deep recession in financial markets are already here.
In the end the the Fed has only another 350 basis points worth of ammunition.What 'medicine' will it use after that? After that all recovery is based on hope.
Exciting times really.The financial services industry needs a severe downturn to get rid of all the idiots in the investment banks.If you don't know who they are.You're probably it.Here's hoping markets continue to deteriorate quickly.Why do l care,I'm long cash.
RB
The Fed's emergency rate cut today was laughable.What on earth will lowering interest rates do in a world where trust has broken down.Banks aren't lending to each other,not because of lack of liquidity/cost,but lack of trust.Guess what, money can't buy trust.A novel concept.
Sadly Mr Bernanke's only trying to fix the mess his predecessor,Mr Greenspan made.50 years from now Greenspan will be remembered for one thing only.As the Central Banker who precipitated the conditions for the worst asset inflation bubble for a century for no apparent reason.He has now joined a hedge fund,Paulson & Co, specialising in essentially selling sub-prime short.It's the opposite of a virtuous circle.A vicious cycle.
Assuming deteriorating US corporate earnings,high unemployment,poor consumer confidence and impaired bank balance sheets,then the conditions for a deep recession in financial markets are already here.
In the end the the Fed has only another 350 basis points worth of ammunition.What 'medicine' will it use after that? After that all recovery is based on hope.
Exciting times really.The financial services industry needs a severe downturn to get rid of all the idiots in the investment banks.If you don't know who they are.You're probably it.Here's hoping markets continue to deteriorate quickly.Why do l care,I'm long cash.
RB
