Black Monday on Wall Street/London?

[Stogie]

It's coming up folks... Will it be a 'Black Monday' in the markets around the world or will the market be buoyed by the US bailout... (Thanks you Americans, by the way!)

Of course no-one really knows unless you are working there tomorrow armed with a trillion dollars worth of worthless 401k plans!

[pacman]

The Fed can't allow the markets to collapse & with the aid of the Plunge Protection Team, they won't.

A division of the Federal Reserve with access to unlimited money, the PPT have been very active all year, intervening on a daily basis to add buying support to the Dow Jones Index, without which the entire US equities market would have been wiped out months ago.

Every big one day fall has been quickly followed by a buying rally.

This has been wrongly credited to shrewd investors snapping up bargains.

In some cases the smart guys have swooped but mostly it is the unseen hand of the PPT.

I will stick my neck out & predict that even if there is a 5-600 point fall Monday, that it will soon rebound by the magic of money created out of thin air.

The PPT, one more reason why the economic meltdown of Wall Street will end in a giant stinking mess.

[PigDogg]

We should have a good idea in a few hours when the Asian markets open.

The bailout package should be received well in Monday's trading but long term there is limited upside IMO.

[katoeylover]

I think it will be ok tomorrow.

The UK Gov't have just "taken over" another building society this weekend , The Bradford and Bingley and i reckon there is a huge load of bad news to come.

It doesnt take a brain surgeon to work out that the almost obscene and illegal borrowing the Banks allowed in the late 90's and early 00's would come back to haunt them at some stage, you reap what you sow, and now for them to bleat like they are, on the back of huge salaries and bonuses, is frankly disgusting.


Why should we bail them out. No-one is helping small businesses from what i can see, with the banks now holding back all lending. They think they are special cases.

Privatise the profits and nationalise the losses.

Makes you want to fucking cry...

[pacman]

With 6 dedicated news channels on my hotel's TV service, I have hours every day to follow this story & in the past 24 hours there seems to be a real hardening of attitude towards "gifting" $700 billion US to these corporate criminals & I have the impression that the money is no sure thing.

There are many arguments being given why this won't help in the long run & in fact could well make it worse.

Either way, the really bad news is still to come.

[Snick]

The market will surge Monday, and lose it by the end of the week when some other domino falls.

[Tomcat]

I agree with that. This has no happy ending thats for sure and i would not be surprised to see either Fords or GM fall before October is out.

It will get a lot worse. Of that there is no doubt in my mind anyway.

UK
I noticed that the Bradford and Bingley have just been taken over by the Govt. What happened to Capitalism as i knew it, red in tooth and claw...like KL says its makes you want to cry

[azza33]

This is not about any bailout of the current crisis guys, this is about bailing out the American egos!

If the current crop of major US institutions, left standing, had to mark to market there exposures, i think you find there would be nearly ZERO US icons left, as they would wipe out their asset bases and require foreign capital to exist going forward (Arab and Chinese money) - foreign ownership!

The "solution" for this is to get the taxpayers to purchase the toxic assets at inflated prices, hence removing them from the balance sheets and replace them with tax payers cold hard cash!  

The government has basically set up a fund so companies can avoid there regulatory requirements to write down this worthless junk and consequently minimize the further evaportation of these once mighty american financial powerhouses. The government can then sit on these assets for decades and eventually gets its cash back, maybe not in real terms, but it removes the requirement to value these assets at near zero.

As a US taxpayer, i can't imagine if i'd be happy with that.

So all this round is going to do is keep alive a few players.

Will it stop the US economy going into recession: no!

Are the money markets actually function currently even with the current bailout plans: no!
- they are still chronically seized and this is why the world reserve banks are pouring cash into the system as it has essentially seized up and no banks are lending to each other.

The above plan is also a last chance to instill confidence to the banks that going forward they can lend to each other.

So the market in its nievety may get a bounce out of this, but only short term.


In the medium term the US market will decline:

Why? Simply because earning must rise 33% to justify the current index level.
In this economic times, that wont happen - so the index is going to keep falling a long way yet.

The bear market is here to stay gents....  

[azza33]

For a little perspective....

This is S & P 500 .... sorry for poor quality images!

The dot com crash was much worse than the levels of current decline -  so far  

Perhaps people in the US & UK are feeling this more this time around because the misery is related to property rather than the sharemarket

[Snick]

The plan sucks, but every other option sucks more

Doing nothing could lead to Depression. The philosophy in 1929 was let them all fail.

Today's economy depends on banks, financial institutions and companies loaning each other money on a constant basis, sometime only for a few days and sometimes for 30 years (like a mortgage). But if that liquidity dries up (which it is) then even sound companies get hurt, and that causes a downward spiral.

Its hard to understand unless you've worked in finance just how much money moves around on a day to day business between companies and banks buts its like blood moving between parts of the body and if the blood stops moving it doesn't matter if the right hand is healthy or not it will die from lack of blood. And right now the blood ain't moving.

The situation is not save a few companies, the situation is save the system, because if the system goes we are all fucked (American and non-American).

If we are very lucky, this bailout will stop the tightening of credit and allow for the economy to recover next year, and then 5,10 years on the Fed can resell the assets they bought for a profit. Thats the best-case rose colored glasses scenario, but the worst case scenario is a full on depression and that would hurt a lot more than a 700 Billion bailout.

ps. This isn't a stock market crash like the dot-com crash, this is a bond market crash...and some of these bad bonds/financial instruments are being sold off at 25% of their original cost.

[azza33]

(Snick @ Sep. 28 2008,20:48) ps. This isn't a stock market crash like the dot-com crash, this is a bond market crash...and some of these bad bonds/financial instruments are being sold off at 25% of their original cost.

I beg to differ!

It's a property market crash - and nobody is bothering to stay around to pay off their mortgage because they are just financing large levels of negative equity. They walk, and then the banks and bond holders get shafted.

If you look at the relative position of the US , UK and Japanese property markets before this meltdown, pricing in the US & UK was comparable to the time Japan had a meltdown that dragged their economy down for many years.  

As a consequence of the mass securitization of property & other debt, we have a bond market that's collapsed.

And the tertiary effect is the current bear market on world share markets.

Some of the bonds, CDO, CMBS have been marked down by up to 78-90% (see M.L and NAB).

By the way CDO were first used by Michael Milkens mob back in the 80's.... and they used the RICO act to shut him down.

You have to sit back and laugh that 20 years later we've all been caught out again~  Oh the irony  

[azza33]

Personally i don't think this is a depression type event.... many parts of the economy are in great shape.

It just requires the financial system to deleverage and recapitalise.

The process is well advanced and 500 billion of garbage has been written off; from memory there has been about 350 billion of capital raising to replenish asset bases.

This plan just fast tracks the cleansing process and "hopefully" frees up the money markets- and will maybe save a few names in the process.

[Snick]

same same, since the bonds are based on properties (mortgages, CDOS, etc..)

[Stogie]

Fascinating debate, fellas... Good stuff.

[Snick]

(azza33 @ Sep. 28 2008,21:05) By the way CDO were first used by Michael Milkens mob back in the 80's.... and they used the RICO act to shut him down.

Discussing the AIG meltdown caused by insuring CDOs

The insurance giant's London unit was known as A.I.G. Financial Products, or A.I.G.F.P. It was run with almost complete autonomy, and with an iron hand, by Joseph J. Cassano, according to current and former A.I.G. employees.

A onetime executive with Drexel Burnham Lambert €” the investment bank made famous in the 1980s by the junk bond king Michael R. Milken, who later pleaded guilty to six felony charges €” Mr. Cassano helped start the London unit in 1987.

http://www.nytimes.com/2008/09/28/bu...28melt.html?hp

"Its a small world after all......"