Comments on: What now? http://norunnyeggs.com/2008/09/what-now/ The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think. Sat, 11 Feb 2012 02:40:24 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Shoebox http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36256 Shoebox Tue, 30 Sep 2008 17:52:56 +0000 http://norunnyeggs.com/?p=3532#comment-36256 Well, let's look at what caused them to quit: High gas prices Increasing mortgage costs inability to refinance equity in homes and now, concern about income (jobs). Gas has come down, soon to be $1 lower than the high, that will help as it will likely allow easing on issue #2. However, getting equity to spend on new TVs isn't going to happend for a long time. I think the jobs picture will stabalize/improve as soon as the media thinks it should i.e. recession is when your neighbor loses his job, Depression is when you lose yours. Most folks it is their neighbor and should stay that way. Short answer, I think some of this could settle early next year (after Obama waives his arms across the country to calm the economy!) However, things will not dramatically improve because the main driver of the past 5 or 6 years, equity, is not going to be there. Well, let’s look at what caused them to quit:
High gas prices
Increasing mortgage costs
inability to refinance equity in homes
and now, concern about income (jobs).

Gas has come down, soon to be $1 lower than the high, that will help as it will likely allow easing on issue #2. However, getting equity to spend on new TVs isn’t going to happend for a long time. I think the jobs picture will stabalize/improve as soon as the media thinks it should i.e. recession is when your neighbor loses his job, Depression is when you lose yours. Most folks it is their neighbor and should stay that way.

Short answer, I think some of this could settle early next year (after Obama waives his arms across the country to calm the economy!) However, things will not dramatically improve because the main driver of the past 5 or 6 years, equity, is not going to be there.

]]> By: steveegg http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36255 steveegg Tue, 30 Sep 2008 17:39:42 +0000 http://norunnyeggs.com/?p=3532#comment-36255 So noted. The question then becomes, when does the typical consumer begin to spend again? So noted. The question then becomes, when does the typical consumer begin to spend again?

]]> By: Shoebox http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36254 Shoebox Tue, 30 Sep 2008 17:29:35 +0000 http://norunnyeggs.com/?p=3532#comment-36254 "money back into the market" = suckers bet! Even if the deal gets done, there is so much negative sentiment right now that each piece of bad news gets significant reaction down and good news is mostly discounted. I'm guessing this thing will turn based on the consumer concluding that machinations on Wallstreet are not impacting them. Until then, markets will gyrate. No "investing" is currently happening, only "betting!" “money back into the market” = suckers bet!
Even if the deal gets done, there is so much negative sentiment right now that each piece of bad news gets significant reaction down and good news is mostly discounted. I’m guessing this thing will turn based on the consumer concluding that machinations on Wallstreet are not impacting them. Until then, markets will gyrate. No “investing” is currently happening, only “betting!”

]]> By: steveegg http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36253 steveegg Tue, 30 Sep 2008 17:04:12 +0000 http://norunnyeggs.com/?p=3532#comment-36253 That's why I said it's not a direct comparison. I don't believe there is a single entity that has the mix of businesses that AIG has, and the FDIC model depends on finding a peer. Switching topics to the markets - money is flooding back into the markets (with the notable exception of the precious metals), erasing roughly a third of the loss from yesterday. That’s why I said it’s not a direct comparison. I don’t believe there is a single entity that has the mix of businesses that AIG has, and the FDIC model depends on finding a peer.

Switching topics to the markets – money is flooding back into the markets (with the notable exception of the precious metals), erasing roughly a third of the loss from yesterday.

]]> By: Shoebox http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36252 Shoebox Tue, 30 Sep 2008 16:57:30 +0000 http://norunnyeggs.com/?p=3532#comment-36252 The one caveat I'll give you on AIG is that it is a MUCH different animal that WaMu or Wachovia. The latter two are much more traditional banks and therefore easier to assimilate into exisiting banking institutions...AIG? Who's their peer? Certainly a smaller group of buyers. The one caveat I’ll give you on AIG is that it is a MUCH different animal that WaMu or Wachovia. The latter two are much more traditional banks and therefore easier to assimilate into exisiting banking institutions…AIG? Who’s their peer? Certainly a smaller group of buyers.

]]> By: steveegg http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36251 steveegg Tue, 30 Sep 2008 16:43:26 +0000 http://norunnyeggs.com/?p=3532#comment-36251 Do I expect that to happen? Yes. However, the longer AIG goes without a set of buyers, the less confident I get, especially if we get a D sweep (there's my conspiratorial side again). I'll point out that the FDIC did manage to find buyers for both WaMu and Wachovia without dipping into the insurance fund. However, as I alluded to earlier, there's potentially far more to be purchased than can be purchased in the current economic environment, and every bank that fails brings that point closer. Also, while it isn't a direct comparison, I believe that WaMu and Wachovia went for less than what AIG went for. The fact that we don't have a private entity or set of entities able to take AIG tells me that we are very near the point of not finding private takers for failed banks. Do I expect that to happen? Yes. However, the longer AIG goes without a set of buyers, the less confident I get, especially if we get a D sweep (there’s my conspiratorial side again).

I’ll point out that the FDIC did manage to find buyers for both WaMu and Wachovia without dipping into the insurance fund. However, as I alluded to earlier, there’s potentially far more to be purchased than can be purchased in the current economic environment, and every bank that fails brings that point closer.

Also, while it isn’t a direct comparison, I believe that WaMu and Wachovia went for less than what AIG went for. The fact that we don’t have a private entity or set of entities able to take AIG tells me that we are very near the point of not finding private takers for failed banks.

]]> By: Shoebox http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36248 Shoebox Tue, 30 Sep 2008 15:58:46 +0000 http://norunnyeggs.com/?p=3532#comment-36248 Dad, I'm a cynic, Steve gets closer to conspiracy theorist on this one (and I say that with all due respect!) I think we both agree that the RTC model is one that could work here. In fact, I think you are right in pointing out AIG in that it looks to be proof of that model i.e. buy assets that are technically bankrupt but have higher value than they are booked at and get them back into the hands of folks who can do something with them. The problem we both have is the extra crap tossed into the bill. I'm at the point where I would like to argue the ideology purist position but recognize the political reality. Steve is still hoping a pure RTC bill can get passed. Dad,

I’m a cynic, Steve gets closer to conspiracy theorist on this one (and I say that with all due respect!) I think we both agree that the RTC model is one that could work here. In fact, I think you are right in pointing out AIG in that it looks to be proof of that model i.e. buy assets that are technically bankrupt but have higher value than they are booked at and get them back into the hands of folks who can do something with them. The problem we both have is the extra crap tossed into the bill. I’m at the point where I would like to argue the ideology purist position but recognize the political reality. Steve is still hoping a pure RTC bill can get passed.

]]> By: steveegg http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36247 steveegg Tue, 30 Sep 2008 15:53:40 +0000 http://norunnyeggs.com/?p=3532#comment-36247 Is the institutional credit market any more liquid than it was (wasn't, really) just before the Feds took over Freddie, Fannie and AIG? If anything, it's locked up even tighter. I see nothing, other than greasy assurances by the seekers of the government teat, that says that spending another $350 billion for the distressed paper (which is all that would have been released this year) would have any more effect than the <del>economic stimulus</del> return-to-welfare package earlier this year. Is the institutional credit market any more liquid than it was (wasn’t, really) just before the Feds took over Freddie, Fannie and AIG? If anything, it’s locked up even tighter. I see nothing, other than greasy assurances by the seekers of the government teat, that says that spending another $350 billion for the distressed paper (which is all that would have been released this year) would have any more effect than the economic stimulus return-to-welfare package earlier this year.

]]> By: dad29 http://norunnyeggs.com/2008/09/what-now/comment-page-1/#comment-36246 dad29 Tue, 30 Sep 2008 15:47:24 +0000 http://norunnyeggs.com/?p=3532#comment-36246 <i>AIG approach that failed spectacularily</i> It failed, already? The Fed will sell off the major components of AIG and recover the $85Bn in the next 12 months. You expected what? A 1-day turnaround to find $80++Bn? AIG approach that failed spectacularily

It failed, already?

The Fed will sell off the major components of AIG and recover the $85Bn in the next 12 months.

You expected what? A 1-day turnaround to find $80++Bn?

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