Bleak Outlook for the Economy?
Filed Under: Hot Fudge
This morning, the market was bleeding red, over concerns of Bank of America needing some additional cash infusion to “bail them out”- on a side note, “bailout” ought to be the word of the year 2008. This news sent the Dow sliding more than 200 pts to fall below 8,000 for the first time since Nov. 21.
What in the world is going on? When this stuff was still hidden, with much people not knowing what’s going on, it was “ok” in that sense for the Fed and Treasury to throw money around stupidly, however now everyone on Main Street knows what is going on, it’s an utter slap on the faces of the US tax payers.
Who raises a kid that crashes a Ferrari and comes back saying “dad I just crashed the Ferrari, now I want an Aston Martin”? Bank of America in the midst of the financial mess acquired a worthless countrywide in order to “save” the mortgage industry, without any proper evaluation of the balance sheets, debt obligations, worthless assets etc and a few months after this acquisition, Bank of America decides to get a new toy, Merril Lynch, at least they spent 2 days doing their due diligence and between Friday and Monday, Merril Lynch employees found out from CNBC/Bloomberg that they now worked for Bank of America.
The point of the rant is this; we can’t keep having unreasonable bailout for everyone that is called a bank. Is the case really that banks are too big to fail or more like they are too big not to fail? The so called big banks can’t keep making poor decisions and then run back to “mommy” and expect to get another bailout lump sum, who then is responsible for keeping them accountable? Who is responsible for keeping these guys on their toes, who’s holding them accountable? Someone once told me that only a crazy person keeps doing the same thing over and over and expects a different result. The Fed and Treasury have not been able to clearly pin point or graphically show the American tax payer the success of the initial $350 billion spent. We’ve seen multi billion dollar numbers thrown around so much that it makes it normal to hear a company lost a billion dollars in a quarter and think nothing of it.
It’s ridiculous to think that the Fed’s balance sheet has grown by 1.2 Trillion dollars in less than a year and here’s the numbing part, we don’t know what percentage of this number is secured by any real asset, $1.2 Trillion is an equivalent to $4000 for every American, probably double that for every American who received the $500 stimulus package. How’s that for a bailout/stimulus package? see this post. Speaking of stimulus, the House Democrats are circulating an $825 billion economic stimulus measure that emphasizes health care, education and highway constructions as well as tax cuts for individuals and businesses, looking to be signed by President- elect Obama in February.
When are we going to get some kind of report card to know how successful these resuscitation plans by Washington are? Clearly the multi billion dollar cash infusions for the financial companies don’t look like they have helped, given the rising un-employment claims, slow down in productivity and demand etc. Maybe the pundits are right, and the Dow may be heading to 6000, given the pretty staircase formation it has had in the past 2 weeks, the market may be well on it’s way to test the October low and probably fall through it.
By the way, what’s the dollar really worth?
Happy Trading,
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