Latest Fed Action May Not Have Any Appreciable Effect, Contrary to TV Financial Pundits View...

[Blackhatjack]

The DOW opened WAY UP this morning on the announcement that the Fed was cutting the discount window rate by 50 basis points.

The TV financial pundits were all over themselves about how this was the beginning of a new bull market headed toward 14,500.

HOWEVER, the DOW has been slowing spiraling back down (currently UP 145 and dropping).

Why?

1-Options expire today. So people needed to act on those or lose them.
2-Lots of people have been 'shorting' the market and needed to buy cover and lock in those profits.
3-Lots of money was pulled out looking for a safe place to park itself. On any good news they are trying to find that safe place.
4-Nothing has changed about the mortgage lending environment.
5-We still know very little about how big the losses are in the hedge funds.
6-Home prices are dropping, and 7 million homes may still be lost and go on the for sale market.

WE are no where near be reassured that everything will be OK and head back upwards.

There is something fundamentally wrong with the reaction of the markets when you consider what we still do not know.

IMHO It still is not safe to go back in the water yet...

[leftyladyfrommo]

1. Listening to NPR this morning.

They said one of the big problems with the market is that people are panicking because they don't have enough information to make any sort of informed choices.

No one knows how bad the sub prime mess is or just how it will affect anything.

[Blackhatjack]

2. IMHO the TV Financial Pundits are like Hawkers at the Fair...

There are lots of consumers sitting on their money, and those in the market are trying to suck them in without telling them how bad things really are.

This is much much worse than the public has been led to believe.

Before it is over, it will affect auto financing, credit card interest rates, and many other pricing models because of contracted credit policies. There is no way it will not depress home sales prices.

I do not think we have seen the worst yet...

[leftyladyfrommo]

3. Oh, this mortgage thing will get worse.

I was working in the industry when they were making all of those loans. An idiot would have known better.

But they were just making such huge profits from all the upfront fees and higher interest rates that people in the industry thought they had hit the motherlode. They were just raping those subprime borrowers. We could hear them laughing about it clear down the hall.

Those of us who had been around a long time knew exactly what would happen. And, unfortunately, it did.

[sutz12]

4. Rearranging deck chairs on the Titanic. nt

[Blackhatjack]

5. What is different this time is the interconnected global markets are ALL DOWN...

In the past there were always stable or up foreign markets to move money into when the US market was down.

NOT THIS TIME.

The sale of financial instruments of questionable value has 'infected' foreign markets as well.

THere really is no safe harbor to flee to this time.

[gratuitous]

6. I don't know jack about economics

But the media giddiness this morning that the Dow is back up a few hundred or a couple hundred points seems like the demented laughter of the spree killer just before he breaks out the meat cleavers. Any bump in the Dow looks like a desperate gambler chasing his bets, which is a sure ticket to the poor house. Any long term recovery in the market is going to have to wait for a boatload of retrenching and backfilling as the support for that gaudy 14,000 Dow close just a month ago crumbles away.

[ProfessorGAC]

7. Well, I Do

And you're picque is well placed. The market is overvalued right now because speculators pushed it up despite corporate financials (excepting big oil) and other broad ecocnomic indicators showing stagnation. The market had to correct. The fall was a correction, and there is really nothing that can change that.


In addition, even if this magical 14,000 gets hit, that would reflect a total growth of the market of a little more 18% since 2001. 6 years; 18% growth. With compounding, that's less than 3% per year.

And, they're giddy? Ridiculous.
The Professor

[Jackpine Radical]

8. Cramer was right.

"They have no idea how bad it is out there; no idea!

The US market is responding to invisible forces. There is stuff going on under the surface, tectonic plate-type, insider-shuffling realignments going on. When you look at a body of water with a strong wind over it and everything is being blown in one direction, but there is this one sailboat headed directly into the gale, into what sailors call the "no-sail zone," you just have to guess that there are unseen forces in operation. Whatever those forces are, they are operating for their own purposes, and you may be sure that those purposes are not the same as yours.

[Blackhatjack]

9. Until the full extent of hidden losses are known, there will not be any stability in the markets...

I suspect the truth is that the hedge funds are tanking as a group, all at the same time.

If this little ditty were to be confirmed publicly, you would see lots of failures and runs on financial institutions.

IMHO it is the fear of what is suspected but not yet known that has this market in such distress.

And happy talk from TV financial pundits is not going to change that.

[Jackpine Radical]

10. That sounds about right to me.

They are somehow managing to keep things afloat long after the hull has been holed.

[nadinbrzezinski]

12. Like I don't know, countrywide this morning?

They had an honest to goodness run on local branches in LA

[nadinbrzezinski]

11. It closed at 232.89 and the chart

showed it all over the map, except negagive

But I agree with you

This is short term

I have a sick feeling in my tummy that the real conditions in the economy are finally coming home to roost

Remember, 1929 was a crash becasue there was no intervention

Here, they have been doing all they can to cuddle it along, world wide

[catmandu57]

13. Now what?

Was this the action of the ppt? Another round of pump and dump? From what I can see they've played their last card with a rate reduction. There isn't any more billions to be injected, and one day is not going to stop this freight train.
Was today a sucker move to pay off the last of the moneymen, draw john q back in for one final reaming before the bottom drops out?

[Blackhatjack]

14. I think you have peeked behind the veil.... I agree with you

I think the real condition of the economy is hidden from the public, and what we are seeing is 'manipulation' of the markets to protect and payoff friends who are heavily invested in the markets and needed an escape hatch.

I have never seen all the markets worldwide tank at the same time like this. THere is no safe haven in a foreign market for money withdrawn here to avoid losses.

Cheney moved his investments out of the US. Lots of wealthy investors are 'waiting' to see what happens next before rushing back in.

I hope I am wrong ... but I fear I am right. The tanking value of the dollar and the downturn in the credit markets are dragging the economy of this country down and no one seems willing to take any action to intervene because it is politically unpopular.