Post by blueneck on Sept 10, 2007 19:46:04 GMT -6
From Bill Fleckenstein
The president and the Fed chief want to appear to be capitalists while acting like socialists. They're continuing the trend established by Alan Greenspan.
By Bill Fleckenstein
So, Comrades, are we going to get a full-fledged mortgage-market bailout attempt by the "state"? Which may or may not be successful?
Or we will get lip service combined with slow action, meaning that whatever officials try to do will be too little, too late (and therefore extremely ineffectual)?
Since I don't think a bailout will succeed, the outcome is the same either way. However, the rate at which events played out, and precisely how they played out, would vary.
The 'hushaby, don't you cry' guys
In the meantime, President Bush and Fed chief Ben Bernanke have denied they're attempting a bailout, and therein lies the debate.
Apparently, Bush wants to be in a position of saying he's doing something without traveling completely down the bailout path. As for the Fed, it's trying to appear responsible by not slashing the federal funds rate -- while potentially acting more irresponsibly via its willingness to buy collateral of all stripes at the discount window.
Bush and Bernanke seem to want it both ways -- which, like being a little bit pregnant, is a state that doesn't exist.
What we do know is that all this bailout chatter, combined with the problems causing the angst, is sufficiently negative for the dollar to likely see downward pressure and for metals to likely move higher, as they've done over the past couple of weeks.
Gold and silver have begun to divorce themselves from other markets, after a long time of trading in sympathy with them. Recently, they've been firm on a number of occasions, such as Wednesday, when equities were weak. Ditto for their recent action versus the base metals. And they have behaved well when the currency-exchange market has been quiet, as it was Tuesday.
In other words, precious metals appear to be beginning to stand on their own. That would be an important development and one I've been looking for, though I don't want to make too much out of short-run market action.
Conditioned bulls hit the lever
Bailouts are being demanded and contemplated because we have become a bailout nation -- as a consequence of all the bailouts sponsored by then-Fed Chairman Alan Greenspan.
I must admit that I have a hard time rationalizing how it is that stock bulls can be demanding a bailout with the market still up on the year, and with the Dow Jones Industrial Average ($INDU) barely off its all-time high. But getting it both ways is what Greenspan taught folks to expect.
The reason for the current crisis is the problem in the structured-credit market and mortgage loans that have gone bad. Notice I do not use the word "subprime." It's not just been subprime, just as it's not been contained, all along.
Ample reason to rue reckless 'advice'
On that note, I thought it would be worth reminding folks of the advice Greenspan had for mortgage seekers and mortgage originators a couple of years back. On Feb. 24, 2004, in a speech titled "Understanding Household Debt Obligations," he told homeowners that they had been acting too conservatively and that it was costing them a lot of money:
"One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. . . . Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade."
Continued: A legacy of misery
More here
articles.moneycentral.msn.com/Investing/ContrarianChronicles/BushBernankeAndABadBailout.aspx
The president and the Fed chief want to appear to be capitalists while acting like socialists. They're continuing the trend established by Alan Greenspan.
By Bill Fleckenstein
So, Comrades, are we going to get a full-fledged mortgage-market bailout attempt by the "state"? Which may or may not be successful?
Or we will get lip service combined with slow action, meaning that whatever officials try to do will be too little, too late (and therefore extremely ineffectual)?
Since I don't think a bailout will succeed, the outcome is the same either way. However, the rate at which events played out, and precisely how they played out, would vary.
The 'hushaby, don't you cry' guys
In the meantime, President Bush and Fed chief Ben Bernanke have denied they're attempting a bailout, and therein lies the debate.
Apparently, Bush wants to be in a position of saying he's doing something without traveling completely down the bailout path. As for the Fed, it's trying to appear responsible by not slashing the federal funds rate -- while potentially acting more irresponsibly via its willingness to buy collateral of all stripes at the discount window.
Bush and Bernanke seem to want it both ways -- which, like being a little bit pregnant, is a state that doesn't exist.
What we do know is that all this bailout chatter, combined with the problems causing the angst, is sufficiently negative for the dollar to likely see downward pressure and for metals to likely move higher, as they've done over the past couple of weeks.
Gold and silver have begun to divorce themselves from other markets, after a long time of trading in sympathy with them. Recently, they've been firm on a number of occasions, such as Wednesday, when equities were weak. Ditto for their recent action versus the base metals. And they have behaved well when the currency-exchange market has been quiet, as it was Tuesday.
In other words, precious metals appear to be beginning to stand on their own. That would be an important development and one I've been looking for, though I don't want to make too much out of short-run market action.
Conditioned bulls hit the lever
Bailouts are being demanded and contemplated because we have become a bailout nation -- as a consequence of all the bailouts sponsored by then-Fed Chairman Alan Greenspan.
I must admit that I have a hard time rationalizing how it is that stock bulls can be demanding a bailout with the market still up on the year, and with the Dow Jones Industrial Average ($INDU) barely off its all-time high. But getting it both ways is what Greenspan taught folks to expect.
The reason for the current crisis is the problem in the structured-credit market and mortgage loans that have gone bad. Notice I do not use the word "subprime." It's not just been subprime, just as it's not been contained, all along.
Ample reason to rue reckless 'advice'
On that note, I thought it would be worth reminding folks of the advice Greenspan had for mortgage seekers and mortgage originators a couple of years back. On Feb. 24, 2004, in a speech titled "Understanding Household Debt Obligations," he told homeowners that they had been acting too conservatively and that it was costing them a lot of money:
"One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. . . . Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade."
Continued: A legacy of misery
More here
articles.moneycentral.msn.com/Investing/ContrarianChronicles/BushBernankeAndABadBailout.aspx