Across the Curve

By j haynes on Jan 29, 2009 | Reply

does that include homeowner refi’s? yet?

By texalope on Jan 29, 2009 | Reply

I think these estimates are ridiculous. No one really can put a number on this problem.

Marking assets to a hysterical market produces irrational prices. I thought the efficient market theory was disproved some time ago. Suddenly, we accept market value as gospel.

I own a piece of commercial property. Cash flows are performing as expected. Prices are down significantly and I’m not selling . Why should I accept hysterical market valuations.

I suggest that the old saw about economists still applies. When an economist was told something was working in practice his reply -” But does it work in theory”

Throwing out these trillions of dollars as a solution is preposterous.

I, for one, have been steadily increasing my positions. One of the lessons I’ve taken from this once in a lifetime experience is that hysteria rules the day. Talking heads, editorial writers and various influence makers spread the hysteria and are caught up in their own world is coming to an end prognostications.

In the meantime examine what businesses are doing on a microeconomic basis to react. They are battening the hatches , with an eye on opportunity. If they have a strong enough balance sheet they are looking to use it. If not, they are reviewing their finances and preparing .

Business after business is doing this. I take this as a positive. Businesses are cyclical . Investors who have knowledge and confidence can analyze these opportunities and position themselves for the eventual recovery.

Disclaimer; If the world as we know it comes to an end then none of this applies.
I

By Van on Jan 29, 2009 | Reply

John,

Todd Harrison recently mentioned that there is $245B in CP coming due within the next two weeks. I haven’t seen anything on it. Any details and possible impact on the bond market, esp with the upcoming TSY announcement on 4 Feb. hope your enjoying your new grandaughter, I’ll be going to ATL this weekend to visit my new grandson (Nov).

By Stuart on Jan 29, 2009 | Reply

And where does the money come from?

By tekewin on Jan 29, 2009 | Reply

The incredible moral hazard continues. If we, the taxpayers, are going to shell out another $2T for banks, we should own the banks outright for a time. Shareholders should be wiped out, bondholders given a 90% haircut, and current management fired. Otherwise, we’ll be right back in the same situation in near future.

By Van on Jan 29, 2009 | Reply

Thx, I missed it.

By Neil on Jan 30, 2009 | Reply

How is it that when a bubble pops, the post bubble deflated prices are irrational, and yet on the way up, there is an air of nothing but good fortune and rationality?
It is time the Fed developed and implemented a simple tool to pop these asset bubbles before the parabolic launch of good fortune…higher rates.
Could encourage the saving backstop too.
The forgone income of savers to finance this inefficient and unproductive redistribution of capital is tantamount to being stolen property!

By Orlando on Feb 18, 2009 | Reply

Is that it??? try 4 trillion…

By Greg on Feb 19, 2009 | Reply

The true cost of this bank bailout (as currently designed) is infinity, not $2 trillion. The same inept managers are presiding over the same antiquated business model. Only some very serious industry reforms can put a lid on this cost

Then they are refusing to acknowledge that the banks are insolvent — preferring instead to borrow from “emergency” Fed lending programs. Come on guys — this “emergency” is now two years and running; its not an emergency, and its not temporary. The credit bubble is over and you dinosaurs had better adapt

While the Fed pretends to “buy time”, the reality is the insolvent banks debts are accruing. Compounding effects work in reverse — so this cost is also infinity.