Turmoil

I think describing it using this word is quite mild. I should probably be using chaotic or disaster. My year end prediction of 2300 was breached like nobody business in a 110 point freefall this morning after the bailout failure to convince majority of the congress. It was quite expected actually. Quoted Aldric, "at least there are more sober guys in the room". It was not going to be a consensus thing definitely, especially with the elections round the corner. Putting 700b in a pile of mess which might not reap any rewards is insane. The plan has to be more detailed, this is way too brief and risky. The returns which the Fed foresee might not materialize at all. This is by far the worst crisis I have seen on the global level after being through Asian currency crisis and the technology bubble burst

Lets be a little more realistic about things. 700b is not going to save the economy for sure. It is more of a prolonging a terminal cancer patient life through chemotherapy. You are just dumping money to prolong a certain death. I see lots of downside risk and many companies going bust because of this economic downturn. Financial firms that have not disclose the full impact of the SPM, like mutual funds that heavily invest in FI will be one to look out for. Prudential and other insurance firms will follow AIG with many bonds being defaulted. Hedge funds will collapse after the required disclosure on the short selling, exposing their strategy. IBs will collapse because of the change in structure of over leveraging. So what is left? We go back to the basics of consumer banking, giving out loans, pure consumer banking days.

Nationalization of banks is another big thing recently as European banks try to rescue their financial systems. Do not try seriously. Let those fundamentally weak firms just die off. This economy is about the survival of the fittest. You do not deserve to live on if you not worth it. Die off and let the fundamentally strong firms live on for those are the firms worth investing for. Do not keep the rotten apples in a basket of good apples, the worms will crawl over and rot the other apples. I cannot believe the extent of help that the CBs are giving to the banks. Thats why they are CBs i guess..