Thursday, September 4, 2008

Best of the Net - Thursday September 4, 2008

Calculated Risk had an update on Price to Rent ratios in the US. He thinks a bottom may be forming in the US housing markets toward the end of 2009. I still think that would be a best case scenario, but I'm not one to question CR. He's been bang on for many years when it comes to the US Real Estate markets.

Bill Gross, manager of the world's largest bond fund, stopped short today of calling for a complete move toward socialism and Soviet style government control over the economy. He just simply asked for the government to aid him by purchasing hundreds of billions of dollars in troubled mortgage assets. But as Kevin Depew points out in today's "Five Things," Gross is the last person anyone should be listening to on the subject. Read the article here: Five Things You Need To Know: Pimco's Gross Lets the Freak Out

Bennet Sedacca had some humbling charts for comparison to today's situation. He notes the 'expanded flat' formation that we just witnessed in the S&P has been followed by some pretty nasty moves in the past. The years? 1987 and 2001. Read Bennet's article, "Comparing Bubbles: Will History Repeat Itself?"

A crash is a very rare event, so predicting one is difficult (and often foolhardy). However, I would be remiss not to mention that the structural (discussed ad infinitum for 2 years), psychological (the government won't let "it" happen), fundamental (trading at 25+ reported earnings) and now technical frameworks are in place for such an event to occur. Today's action, although one of the sharpest selloffs this year, seemed entirely calm and orderly. It's as if the market were saying, "Woah, this is bad. Good thing it can't get much worse, eh? So is the government going to step in Friday or Monday with some help?"

Although government intervention is not something that should be taken lightly, I am beginning to think that the market has a) discounted that it will happen already or b) no longer believes that it can be of assistance. In either case, the result could be a stampede for the exits on the next round of bailout talks. This is the essence behind one of my Themes for 2008 - The Federal Reserve will be seen at some point in 2008 as an emperor without clothes

No comments:

View My Stats