So the bailout passed. Now what? - Top Stocks Blog - MSN Money
 
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So the bailout passed. Now what?

Posted Oct 03 2008, 02:56 PM by Anthony Mirhaydari
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With the financial-rescue package signed into law, do we face a continued string of lower highs and lower lows in the stock market? If past is prologue, as Joe Biden likes to say, then we're all in trouble.

The market seems to suffering from policy announcement fatigue, according to research by Merrill Lynch economist David Rosenberg. The Troubled Asset Relief Program is just the latest in a string of interventionism: From surprise rate cuts, new liquidity mechanisms at the Federal Reserve, direct or arranged bank bailouts, to short-sale bans, investors have seen it all. Unfortunately, the return from these "good news events" is diminishing.

When one considers the last 15 policy announcements -- dating back to the first discount rate cut in the summer of 2007 -- the S&P 500 rallied an average of 1%. But the reaction to the passing of the Senate version of the TARP bill was a loss of 4%.

Rosenberg believes that the likely reason for the tepid response is that investors have begun looking beyond the immediate credit crunch and towards the looming global recession:

"Considering this is no ordinary cyclical recession but one that is being compounded by a secular credit contraction and broadening asset deflation, it is an open question as how deep and prolonged it will be."

Currently, at around 3pm Eastern time, all the major indices have given back prior gains and are trading flat on the day. Not exactly the vote of confidence the gang in Washington D.C. was hoping for.

(Disclosure: I don’t own or control shares in any of the companies mentioned.)

Related reading:

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Comments

 

The market is probably still going to go lower because of the continuous stream of bad news from dropping corporate profits.  The bailout will just free up the credit crisis, but 'fear' is still running high as many markets around the world are way down this year.  

How to identify the vote of a given Representative on HR3997?

The "bailout" was not intended to fix the liquidity crisis but merely to provide confidence in the market.  The failure of Congress to provide that "reassurance and confidence" deminshed the intended effect the bailout package was supposed to have on the market.  The weak economic data coming out will take the market lower.  Eventually, the economy will rebound.  If history is any indication then we will be in a protracted decline for another 118 days (best guess).

The problem is that this isn't fooling anyone. Most people I know are just as freaked out about this mess as they were three weeks ago, and a few have gone so far as to withdraw everything they had out of the bank (given that these people were fellow students, it wasn't much). That sort of action is entirely redundant, but it's a symptom of the national climate. If it scares college students, one of the hardest populations to get motivated to even think about the national economy (my opinion), then imagine the effect on people who actually do pay attention and have a tangible stake in the markets. People who are afraid are not people who spend money. The banks having capital might make things better there, but consumer confidence can't be cured with liquid asset injection (they tried). This is far from over, bailout or not.

Lower the prime interest rate to 2% and regulate the charge card companies to a max of 5% above prime and we will have credit and confidence in abundance.

very poorly managed and the feds needed to keep interest rates lower instead of raising them for the past 2 years...inflation is not an issue. so what if a coke costs a dollar as long as i have a dollar...its when it costs 25 cents and i dont have a penny, then we have a re-visit of the great depression...

Lower the rates, print some more money and lets get it together. spend lots of cash if you have lots to spend, its time for the wealthy to give back to this country and its time for us to get rise to the challenge.

we live in the greatest country in the world, dont forget your duty as an american to make life better for all who live here

def...are you kidding...lol.   We Americans are interested in sex and money which brings power and success. We are living in a society sad to say, that we only think about ourselves.

so true.

def is definitely in denial.

it's easier said then done Mr Def.

IT IS OUR COUNTRY!

As citizens we have the duty to watch over it. We have the power to elect our Reps, with that power comes responsibility. Our lack of trust in our Government has just been validated by the utter chaos they have created. Those that we have entrusted to manage our affairs in Washington are either totally ignorant or corrupt, or both. They need to go. (some in handcuffs). We then have to insist that those whom we send to replace them right the wrongs that have been fested on the Good People of this country. We have to implore the media, whos duty  and responsibility it is to keep our government in check, to do their job in an unbiased fashion, let the chips fall where they belong. This country has not become the greatest place on earth because of our Government, it is because of

its people and their tireless perduit of Freedom, Justice and the individuals persuit of a better life for their children. Now is the time, and we have not a minute to waist, to take back our country, hold people in government at all levels, city, county, state and federal accaountable. This is a tall order, but we are Americans and we can do it. November 4th is soon approaching. VOTE

The bailout was to help the banks out, not to help the national economy or the American Peoples out. The bank has a license to steal and/or ripping off the American Citizen.  Over the last three decades, the consumer lending industry has spiraled out of control. The United States Federal Government has let happen to us. Some of the American consumers are up to our eyeballs in debt and when we need it the most then the interest rate goes out of control and their nothing we can do about it. The aggressive practices by the credit card companies, banks, mortgage lenders, department stores, corporations, lending institutions the entire consumer lending industry can charge any number of frees, in any amount, this is a legal scam. Corporate greed and accounting games like Providian, this credit card company that paid millions to settle fraud charges and the government lets them keep doing business. This bailout is so the government cans payback for all the money gives to for the president campaign so they can keep steal and/or ripping off the American Peoples.    

Please has everyone forgot about big oil ? my, how short our memories are it all started with oil prices soring and our failure to do anything about it $ 4.00 a gallon gasoline will not work in this country and I hope the people don"t  forget what really started this downward spiral the arabs, the big oil companies, and greedy politicians who should be sent home with no penisions like many americans will be when all this damage is done to our economy this will take many years to recover from many many years so don"t forget who"s really to blame Doug T...........

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