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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.)

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Comments

 

Nice work Anthony... I like your style!  Keep up the good work.

Paulson has named Neel Kashkari a 35 year old engineer to head up the bailout. He will have total authority in charge of the $700 billion dollar check book. This man has no experience in finance, accounting or banking and was one of Paulson's advisers at Goldman Sachs. Do we really want to trust an engineer with no experience to be in charge of this massive bailout?

It looks like we will have a "Dilbert" at the helm.

The 850 billion dollar bailout moves money to big giant institutions, banks, lenders and the stock market. It does this with the "maybe hope, i.e.. BIG MAYBE", the trickle down effect will help the economy. This bail out only helps the very rich big business for taking very big risk in the name of profit. They gambled and lost and the rest of us have been made to pay for there mistakes.

I am on the guy and gal who works for living. I am on the guy and gal who lost a job. I for more education for children and more training for the unemployed. I am for more and cheaper medical care. Everyone in the U.S., people and business alike, would be benefit from cheaper, cleaner energy. I am for creating jobs in THE USA!!!!! The 850 billion dollar is supporting the wrong segment of society. I am for investing in America,  but not only for the very rich, big business, which does nothing immediate for the little working guy and gal and the family who is on the edge of life paying bills and may or already loose there home. This 850 billion dollar investment should GO TO THE 95% USA workers, NOT to the 5%. If we produce more clean energy inside the USA, we create more jobs and lower our energy cost and clean our enviroment.

It seems the needs of the average US citizen continues to be ignored. WE ARE IN THE TRENCHES OF EVERYDAY LIFE - THE WORKING MAN AND WOMAN; WE NEED OUR GOVERNMENT TO BE SUPPORTIVE OF US NOW. Our governement supports big business in the very hope, the crumbs of their success will help the rest of us, i.e. maybe help us....

Now we wait.  The stock market will drop anyway.  The wizards (money people) on wall street will whine for more money.  More banks and businesses will go under.  Main street will suffer...how much is not known. ************* Sooner or later, things will bottom out.  Then start to get better.  ************ The economy has its ups and downs...and it will go up sooner or later.  Maybe some lessons will have been learned...for a while...maybe not.  Some of us remember the savings and loan debacle and why it happened.***********  We Americans will survive.  ************ Peace,  people.

Please, is there anyone out there who would step up to the plate that would be a suitable substitute for the two we have currently running for President. We need a leader with strong leadership skills,good common sense, education credentials and can walk,talk and chew gum at the same time.

Neither of these two candidates nor their running mates can hack it. We are in trouble  if this is the best  we can do.

I live in Michigan and we have been in a recession for 6-8 years now. This started right as a repukelican gov. was leaving. He used a billion dollar surplus to balance the budget his last year.(by law it has to balance, unlike fed.). He and his buddies all walked away very rich. Is this sounding familiar? Looks like Bush is going to leave the country in the same shape as gov. engler(his name doesn't deserve to be capitalized) left Michigan. We got a female democrat to replace him and she hasn't done a damn thing to help. Nothing against females, I have one for a mother, but when you are left with a mountain of manure and one square of toilet paper to clean it up with you are screwed. It is way past time to outlaw lobbyists and political donations. These ***holes don't do the will of the people they do what the lobbyists and their parties want. Bill is right if these 2 are our hope for being saved we're screwed. Rot in hell Bush

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