Tuesday, Mar 11, 2008
DOW up 415 points or almost 4% on FED handout - Is it now business as usual?
Bloomberg: U.S. Stocks Rally on Fed's Plan to Lend Up to $200 Billion
U.S. stocks rallied the most in five years after the Federal Reserve said it will pump $200 billion into the financial system to shore up banks battered by mortgage- related losses.
Posted by tyrellcorporation @ 08:11 PM (840 views) Add Comment
14 Comments
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1. who stole my pension? said...
What goes up has to come down! Except for inflation - this will only keep going up as they pump more and more money in.
2. Pmaupoil said...
They are throwing everything they can but they do know that there is no way out of that mess. They need to show that they are doing something, it is their job after all. In the past few months, they injected billions that only relieved the market in the short-term.
3. alan said...
They will need another $250bn before the start of April.
Then another $300bn in May...
Then you get to notice the inflation....
4. happyrenterz said...
I think the rally is a relief that less banks might go bust. They can now use their toxic mortgage securities to borrow money. But remember it only allows them to borrow money at a cost because they have to pay interest. So this is just a short term fix to give banks time to sort out their problems. I suspect those problems are so huge that buying time wont help some of them.
The dollar actually rose today on the news. If this rally fades quickly look for another heavy stock market crash.
5. harold said...
"The dollar actually rose today on the news. If this rally fades quickly look for another heavy stock market crash."
I give it a week tops, then look out below. There is systemic failure - inflation is not the cure.
6. harold said...
http://goldmoney.com/en/commentary-print.html
7. shipbuilder said...
I remember a point not so long a go that someone made on here that made sense - with all the sub-prime losses etc, debt is being destroyed more quickly than new money is being created, so inflation is not as much a risk as is thought.
Anyone have any thoughts on this?
8. dohousescrashinthewoods said...
Quite - the debate between deflation and inflation. Kind of looks like deflation is winning. If it all balances, we can hope for stagflation. This could well be helicopter Ben doing his thing.
Intuitively, I think this is a weak fillip - like peeing your pants to keep warm. Good for a little while - perhaps enough, even, to get your buddies out, but ultimately futile.
There is no more money.. or perhaps more to the point, money is no more?
9. harold said...
dohousescrashinthewoods, have a look at:
http://www.kitco.com/ind/Wiegand/mar052008.html
10. happyrenterz said...
http://www.kitco.com/ind/Wiegand/mar052008.html
I like his cheery face next to the headline:
Stagflation Today Hyperinflation - Depression Tomorrow
11. Stevie Dee said...
How can a market jump 400+ points in a day on state intervention. The markets have lost credibility!
12. harold said...
happyrenterz, my guess is he's smiling because he went long on gold in 2000.
13. 51ck-6-51x said...
The market sees this as intervention into the feedback loop of write downs causing credit market illiquidity causing write downs, etcetera.
HOWEVER - The banks may only swap MBSs that are AAA/Aaa rated for the treasuries.
That debt will still exist, albeit bought by Uncle Sam, and the toxic waste will still be on bank's books.
I fail to be as enthustiastic about this move as the stock market, the only thing could be that the Fed will get some good MBSs on the cheap! (that is if the ratings are now accurate - chortle).
14. happyrenterz said...
A lot of AAA is that in name only and has not been downgraded yet AAA Paper? 92.5% Are Not