Yumpin yiminy there is a lot going on out there.This is a chart of USDJPY. I'm not sure how to quantify a currency collapse but how close is 22% in eight months?
Is the Fed going to orchestrate the bailout of every institution above a certain size?
Things seem to be broken all over the place but the stock and bond markets are not that bad off (yet?). Stocks are only down 17% from the high, while that is more than down a little it is far from historically noteworthy. Yields on the treasury curve are quite low but they're not at Japan-like levels.
By the way, how many people said 2008 was finally the year to buy Japan? And were these the same people who said it last year and the year before that?
The Fed is doing big and desperate now instead of doing small and gradual nine months ago. While I am not smart enough to quantify the ultimate magnitude of any of this, the blundering by the Fed seems to now be bearing some very ugly fruit.
Could a Fed induced introspective look at leverage, value at risk, risk models, inventory on and on, a year ago when there was not even the slightest inkling...well except for the failure of New Century and abnormally sloped curve... have lessened some of the blow? Maybe not though.
$2 for Bear Stearn's equity? Really? Cripes.
The Fed cut the discount rate Sunday night just as the Australian equity session was opening, two days before a meeting, man.
The frantic nature of all of this could be resulting in what will turn out to be bad decisions implemented very poorly and with more consequences coming down the road.
Whatever comes of all of this I think it will take a while before it is all sorted out. The media will continue to ask if now is the time to buy but keep in mind that this bear market could last until April, 2009 and still be considered normal.
20 comments:
I think you are missing the forest for the trees. The Fed was slow. OK I will accept that, but you still ignore the trillions in derivatives and not acknowledging the excessive debt levels.
When the score is 34587 to 3 talking about who made the last out and lost the game is kind of pointless. We are experiencing a collapse of debt and the fed can only do so much.
We are turning Japanese.
My vacation was much more enjoyable, but I am looking forward to a buying opportunity coming.
seg
wonder if the "Random Walk" anonymous dude bought BSC over a $100 and held on all the way down to $2 all the while telling himself: "This is a Random Walk, I have to buy and hold. Nobody knows where BSC is going..."
When you have a ton of money, what's a million or a billion loss?
It's the little one like the secretary or mailroom guy I feel bad about.Those that lost alot probobly deserve to loose it.
Oh Oh,
could we see home prices suddenly plummet in Conneticut and suddenly soar in Newark for example??
It is noteworthy to me that the market shrugged-off the Carlyle event last week, and appears to be doing the same with BSC today. It might be that we'll have to see a stronger "feel good" rally before S&P 1275 gets taken out.
Of course the random walk guy didn't buy BSC at 100 (have you even opened a Malkiel or Swensen book, it would be obvious that would be against their advice).
He has bought the S&P 500 on various pullbacks. He also has taken advantage of weakness in some international indices.
Right now he see's other values that he would like to buy and hold. Stock is cheap right now, but there is something else even cheaper.
Oh yeah, and he's up year to date due to some nice distributions (down a bit since October though).
no but, aren't Malakiel and Bogel in this market with their index funds, not doing very good. I've at least got some funds doing ok, much better than any index.
A stitch in time saves nine billion. (Obscure scifi reference)
All the entities depending on Bear Stearns would lock up if Bear collapsed. This may be a smart thing to do. If things work out well, Bernanke will be remembered as a genius.
Haven't we seen this play before? Doesn't there have to be a body or two before the final act? I'm thinking Drexel Burnham Lambert or Continental Illinois from previous disasters.
This actually looks normal for this stage in the crisis.
Sunday's post showed a picture of a Kauai fire truck. But aren't you on the big island? Are there two Kauais?
Comparing the hysteria on Mike ("Mish") Shedlock's blog, to the rational worry on this blog, one can extrapolate to some hope for sanity, and maybe something less than Armageddon for the capital markets.
Today's bounce tells me we are so not done with the Bear.
R
the hysteria on Mike ("Mish") Shedlock's blog?
really? wow that surprises me i will check it out.
the picture of the Kauai truck was taken in 2003.
Fred, i think that a big name is going away is a fine sacrifice--this is not to say there can't be more but as I wondered in the post is $20 billion enough? It used to be a venerable name
Rick, the bear not quite over? But the market felt so good today. Don't rain on the parade man!
There have been a few feel good moments before today (if today rally was, of which i am skeptical) and one of them will be the last one and will actually be the bottom. After a 19% or so decline i doubt the bottom is in (agreeing with you) but who knows.
I wouldn't call this a currency collapse. it's a classic case of Dornbusch overshooting, and is probably the best and least painful way to resolve the fundamental problems with the US economy - the weak dollar is ultimately the best way to restore competitiveness to the real economy and restart the US economic engine.
Glad to see I'm not the only one getting tired of the hysteria and almost disturbing glee on Mish, CalculatedRisk, Big Picture, and similar blogs. This place is a haven of sanity.
This is a normal bear market, not by any means the end of the world.
The market's only 17% down but when that's priced in dollars it's, like 1000!
if 250 billion was written off last year and 500 billion is written off this year and another 250 billion is written off next year that would be 1 trillion dollars. This would not be fun, but I do not think it would be the end of the world. It would probably be rather manageable.
try not to get all upset about the more negative scenarios. It will all work itself out.
seg
Does anyone have any history/precedent that shows that not all bottoms are preceded by capitulation selling?
The breadth today (Monday) was terrible, but - on the bright side - we definitely "de-coupled" from Asia/Europe.
Feels like a head fake. But I know I can't tell the difference except using hindsight.
Re: anon 4.35 - don't spoil it for me. I'm counting my money using the old Portuguese Escudos!
R
Talking about Asian currencies, the Korean Won is going the other way (down 8% in 2 weeks).
What does this mean???
CA
http://articles.moneycentral.msn.com/Investing/MutualFunds/NoQuickCureForTheMarketsIlls.aspx
http://tinyurl.com/2z8yo2
off topic (when has that deterred me)
In the French part of st marten the euro is primarily used. I keep reading that the dollar is reportedly not taken in some regions of the globe due to the large drop. This seems kind of dumb to me as all they need to do is appropriately adjust the exchange rate.
in st marten a ferry boat operator was quoting 5 euros or 7 dollars. a restaurant was quoting a 1 to 1 exchange rate as a come on and it worked because their prices were roughly the same of their competitors.
I do not think this helps clarify exchange rates but it supports the rumors I heard that businesses were hurting.
I guess the point I take from all this is the nonsense we read about decoupling is just that nonsense. I am not sure how far we have to fall but I fully expect the rest of the world to follow us down even if they are not hurt as much.
While this is not fun I would remember as always it is temporary and that a great buying opportunity is coming.
seg
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