Posted on 9/11/2008, 5:26:03 AM by TigerLikesRooster
The Economy: Best- and Worst-Case Scenarios
Will the Fannie Mae/Freddie Mac bailout work? It pays to imagine the possibilities
by Peter Coy
O.K., we've finally wrapped our minds around the impossible: On Sunday, Sept. 7, in the name of preventing a financial meltdown, the conservative Bush Administration announced that it was seizing control of two of the nation's biggest and highest-rated (until recently) financial institutions, the mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE). In short, pigs can fly, and hell really can freeze over. So maybe it's time to expand our sense of the possible and ask what other shockers are in store. Will the 13-month-old credit crunch get even worse and drag down the entire global economy? Or are punch-drunk Americans due for an even bigger shock, namely some good news for a change?
The financial markets are grappling with just those issues—and gyrating between euphoria and panic. Stocks climbed on Sept. 8, the first trading day after Treasury Secretary Henry M. Paulson Jr. announced that he was placing Fannie and Freddie under federal conservatorship. The Standard & Poor's 500-stock index rose 2%. But the next day, fears that venerable investment bank Lehman Brothers (LEH) might go under dragged the S&P 500 down 3.4%.
(Excerpt) Read more at businessweek.com ...
Ping!
No offense, but articles like this drive me nuts.
“The economy will either a) soar or b) crash so HEDGE YOUR BETS.”
Basically, they are saying nothing, predicting nothing and advising nothing. HOW THE HELL do I hedge my bets? Put myself in position to be only 1/2 ruined by losing half my life savings?
They article has me nailed, though. They talk of everyone working off a worst-case strategy. That is how I feel. My strategy is to stay safe, don’t lose money. If I lose opportunities, there will always be more. If I lose money, I have to start over. No thanks.
I would much rather miss buying in at a bargain than catch a falling knife. But this article certainly doesn’t do a damn thing to inform or advise me toward a future course of action.
“Maybe it will, and maybe it won’t, and maybe we just can’t tell.”
Not the best article you’ve posted...
Easy credit by the Fed and Treasury jumping on the band wagon simply makes one element of buying a home less expensive. What needs to be done is make people want to buy a home again. One of the huge selling points to home ownership is wealth formation, especially for younger workers. Now it appears that homes don't hold wealth. There are tons of things the Congress can do via the IRS code to make home ownership worthwhile again. Cheap funds is like pushing on a string. Giving buyers a reason to buy is pulling on the string...it actually gets something done.
-- Supposdly said by a frustrated President Truman.
They rarely talk straight about the problem. However, you can glean their state of mind from what kind of garbled message they churn out in publication.
To me, this article indicates that we are close to the huge disaster.
That's about the prevailing tune. Lots of investors are sitting on the sidelines waiting for the national sanity to be restored.
This is what happens when corruption becomes institutionalized -- it eats right to the core of every branch of society: business, government, academia, markets, religious organizations, politics, the media, etc., etc.
Rational people sense the damage and the danger, and that is precisely why they are instinctively drawn to an anti-corruption leader such as Sarah Palin, at this particular time in history.
Well, when that chubby faced dame who hawks Amica Insurance stops showing up on my tv every five minutes or so, that will be a sure sign the apocalypse is upon us.
Hedge your bets?
Buy gold, or something else of intrinsic worth... beachfront houses (or a hotel) in Costa Rica maybe.
These banks should be allowed to fail. Housing prices will drop for another year or so to where they should have been all along, when market determines what's a good value. Yes, blood will run in the streets, but oh well. Money was lent that never should have been, someone has to pay it back. These pinhead bankers are a good start.
This is fascism, nationalization of private industry. Unbelievable. The only real beneficiaries of the takeover are the holders of Fannie and Freddie securities, who are bailed out of their bad investment choices, says Robert I. Kessler, CEO of Kessler Cos., a Denver investment firm. Says Kessler: "It's a great thing for the big banks. I don't see any benefit whatsoever to consumers."
Bravo Sierra. Young people should be paying off any high interest loans they have and setting up retirement accounts and savings. A lot of young people don't have their careers established and are going to be moving around quite a bit. Why have the home ownership monkey on your back?
Bubbles, bubbles, bubbles...
If people should be doing this, why aren't they? High interest rate loans are usually associated with consumer spending on consumption items, not investments. It seems they are spending their way into trouble, not investing in long term assets (e.g., a home), IRA's or savings accounts. You can hardly blame people for not having savings accounts right now since most pay a negative real interest rate.
Now, I'm like you. I don't know. I'm waiting - and while I'm waiting I'm losing money.
Some can't because they got suckered into buying a house they couldn't afford.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.