The markets around the world are watching Wall Street dangling from a bridge and it lifeline is about to break – WHY?
Emotion is ruling the markets and I continue to call the shots that $700 billion is not enough and will be at least $1.5 trillion. The ups and downs on Wall Street are being caused by panicked investors and short sellers. Why doesn’t the government do away with short selling all together. Wouldn’t that keep pressure off the companies and the market – of course it would. Will global interest rates save the market from the jump it took and the bouncing up and down as if it were attached to a bungee cord. No!
Regardless of the various banks around the world interest rate cuts banks are still just not lending money; to consumers nor other banks. The liquidity in the market and what caused the crunch is as I have said for months – confidence. Now the pundits have picked up on the fundamental issue that caused the collapse in the first place and confidence has still not been restored. This is and will be an ongoing issue as banks and insurance giants try to keep their heads above water.
Banks have also cut off credit to the people that support our economy. I’ll call the shot again as I have been RANTING about for months - that come holiday and retail season we will see most every sector get hammered. Wall Street knows this already and will wait for consumer confidence and retail numbers to come out and I assure you it will be dismal. This will exacerbate the problems for sure and force the markets to erode much further. Are we at the bottom – no and plan for more bad news – It is coming and from many places. The world is feeling this and as we are connected globally the US markets are under sever scrutiny and pressure from around the world to get their act together. Worse the world is losing confidence in the American system and with that is keeping a very close eye on treasury auctions. Just pray the confidence there does not erode. That truly will be nail in the coffin for our economy and surely bring a 21st century depression upon us.
Do I like the $700 billion dollar bail out and even McCain’s idea of re-pricing consumer loans to market values – NO. But despite everyone’s disdain for all of this there will be a much much higher price to pay and its coming now. McCain’s plan has merit and will allow consumers a better deal rather than foreclosure but that will take some time as well. Until the cancer of our country is solved and the deficit eradicated – please not my 10% plan – there will continue to be deterioration of confidence in our system and the bungee cord will keep going up and down with the elephant and the donkey holding on with a toe.
The problem is that Wall Street jumped and took everyone with them. I know we want these people to drown and cut that cord with $2 trillion of value already sucked out but frankly there is little anyone can do. My strong opinion unlike Cramer is to keep all money in the portfolios that have lost so much value. Keep an eye on the future and hope someone leads our nation to halt and fix the deficit, social security, Medicare and Medicaid to truly restore confidence in our nation and the trust and confidence of our consuming citizens or expect that life line to break for certain. Also, I cannot believe our lawmakers have not changed the Mark to Market rules. This inaction and incompetence is the same as the oversight of Freddie and Fanny and just one more example that Lawmakers should never manage our money let alone a check book.
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