Trust the Government
6th September 2008
As we await news of another government bailout of a public company this weekend, the over-riding theme of this year is: trust the government. The news of what form this latest bailout will take will be announced before the open of Asian markets on Sunday. If the equity holders of FRE and FNM aren’t completley wiped out, then there should be a criminal investigation. The equity holders of Bear Stearns should have been wiped-out. The liberal use of taxpayer money to support risk taking enterprises is criminal. This year is turning out to be one of the most historic in the history of this country.
Trust the government to report numbers correctly. The official job loss yesterday was a loss of 84k. This number includes the fairy tale birth/death adjustment of +125k. Does anyone really believe that construction and finance actually added jobs last month?
As for the market, I have said this all of this year. This decade has been led by an unprecedented credit expansion. The market has rocketed higher on cheaper and cheaper credit. Now, we are facing the opposite of this, a credit depression. Easy credit is gone. The market will continue to grind lower into year-end. This will take years to correct itself, not months.
BA