View Full Version : Bailout still a good idea?
10-09-2008, 11:46 AM
The Fed will almost certainly guarantee bank transactions instead of pricing and buying toxic securities.
Very different, faster acting and much more effective.
Now we will see much more of teh same -- buy GM, buy some airlines, buy more banks, deflate the dollar.
It is a false idea that banks would lend if we handed them a ton of cash -- no, they are hoarding it, in the fear that the consumer will rush the banks.
10-09-2008, 01:27 PM
"The Dow Jones industrials fell under 9,000 this afternoon for the first time since the summer of 2003 as investor confidence that financial markets would stabilize appeared to collapse.
At the close, the blue chips were down 679 points, or 7.3%, to 8,579. The Standard & Poor's 500 Index was off 75 points, or 7.6% to 910. The Nasdaq Composite Index was down 75 points, or 5.5%, to 1,645.
The S&P fell under a closely monitored support level of 960. A support level is important because it is supposed to trigger new buying.
At those levels, the Crash of 2008 has left the Dow 39.4% below its record close of 14,164.53 and the S&P 500 down 42% from its record close of 1,565.15. Ironically, both records were set exactly one year ago today. The Nasdaq is off 42.4% from its 2007 closing high on Oct. 31.
The Dow is off 21% in seven trading days in October. The S&P is off 22% and the Nasdaq 21%.
A key event appeared to be news that General Motors (GM, news, msgs) was facing a new downgrade by Standard & Poor's. The stock was at $4.76, down 31%.
"There’s no safe place to hide," Jon Najarian of OptionMonster.com, told CNBC.
The selling actually caused oil prices to fall in after-hours trading. Crude was at $84.78 at 3:20 p.m. Crude had closed at $86.59 in regular trading, down 2.7% on the day. Some analysts believe crude will fall under $80 soon. The Organization of Petroleum Exporting Countries is concerned enough that it has called a Nov. 18 meeting, possibly to cut production to boost production.
The sell-off came after news that Treasury Secretary Hank Paulson will reportedly use his new authorities to buy direct stakes in U.S. banks to help restore confidence in the markets. Investors, however, didn't seem convinced.
Investors want immediate gratification from the measures the Federal Reserve and Treasury have taken to stop the bleeding in the financial crisis, but several traders are urging patience, saying that it will take time for results to work their way into the financial markets and actually boost confidence.
Short-selling will be allowed once again today after a temporary ban by the Securities and Exchange Commission expired at midnight.
Light, sweet crude oil was down $1.70 to $87.25 a barrel this afternoon."
10-09-2008, 01:30 PM
GM (our client) taking another big ****. Wonder if we get some kind of news regarding a cutback in runs during this weekend's safety meeting...™
10-09-2008, 01:36 PM
The bailout is a good idea for the select few who received it.
10-09-2008, 01:38 PM
The Bail out was NEVER a good idea, so the thread title doesn't work for me!
If ya wanna rob a bank, ask a banker how to do it!
10-09-2008, 02:25 PM
Whether you were for the bailout or against it the primary purpose of the bailout wasn't to artificially boost stock prices. That would certainly be a nice extra benefit for everyone but the primary purpose was to bailout the foundation of the economy and the financial markets.
The proof as to whether the bailout fails or succeeds will be measured on freeing up money so money is available for mortgages, business loans, student loans, car loans etc. It was also to bail out AIG so that people actually still had viable insurance that they were paying for etc.etc. For those that believed the bailout was needed, it was for these types of things that will ultimately allow the economy and financial networks the ability to heal without completely crashing everything.
The big fluctuations we are seeing in the market right now are about emotion and fear of the unknown. The long term performance of the market over the next couple years that plays out will be reflective of the reality of company earnings, growth potential, stabilization of housing prices and the overall economy. If that turns out to be good you could probably argue the bailout worked. If the economy goes down the tubes, credit markets dry up anyway, corporate earnings go to pot and companies like AIG fail anyway then it will be obvious it failed.
Looking at the Dow and SPX scoreboard that is selling off on fear and not necessarily fundamentals over a couple week period doesn't tell us really anything about the bailout. If the bailout works the markets will go back up for the proper reasons based on the fundamentals. Whether or not the mark runs up or down temporarly on emotion doesn't measure anything but emotion itself.