Comments (7)

• Plugging a leak is only a temporary solution. At some point, the leak needs to be fixed, otherwise water gathers and more leaks happen until finallly the whole darn thing blows. I think this week was us just seeing there is a leak, and now investors are getting tricked into believing that patching it (government funds) is a permanent solution. Fundamentals needs to change, and that is not something fixed in a week.

  Comment by rufustfirefly — Friday September 19, 2008 @ 7:05am PST  Reply to this post

• Considering how the movie companies are so wound up in the hedge funds and investment banks they might end up taking a bit of a bath.

  But that might be a good thing in the long run. Something drastic needs to be done to get the moribund media moguls moving, either out or just doing their jobs, and there’s nothing like a new broom to sweep clean.

  Comment by Furious D — Friday September 19, 2008 @ 7:44am PST  Reply to this post

• Nikki you missed what Washingtonians saw last night with the evening press conference on Capitol Hill with assorted Congress critters, Treasury Secretary Paulson (who regardless of who wins the next election is retiring next January), and Fed Reserve Chairman ‘Helicopter’ Ben Bernanke (so called for a speech he gave a few years back saying in essence he’s drop helicopters full of cash onto everyone and everything if there were a financial crisis like, say, well, this one)

  Congress in essence has agreed to rubber stamp whatever Paulson & Bernanke come up with. Not actually educate themselves on whatever it is the financial industry has been up to (hard to do especially since so much of the stuff that is failing –derivatives of credit products going bad– is subject to Hollywood-style accounting and is off balance sheet and hidden from everyone) and then where appropriate legislate from an educated perspective (you know, the job that we theoretically elect them to do and that they theoretically actually do?). Nope. They stayed away from the ultimate third rail of politics and are happy to let Paulson & Bernanke do more of the same.

  Look earlier in the year there were 19 financial companies you (temporarily) couldn’t short per the government. Now that list has grown to 799 (and if any of the original 19 is off the list it’s only because it has either gone bankrupt or is now merged into another company) and the short ban is only til October 2nd. And they’ve been creating new money out of nothing and throwing it every which way including at foreign central banks.

  Here’s a useful analogy: think of a bad film. You can use taxpayer money to pay off everyone you know in the business and even the audience, lobby the government to temporarily revoke the 1st Amendment so the critics and the audiences can’t tell the world how bad the film is but you’ve still got a bad film. Wouldn’t it be easier to let it fail and move on to making the next film rather than alienate everyone trying to save it with measures that are destined to fail?

  And I note with great amusement that even Bloomberg saw that the President is in hiding on this issue

  http://www.bloomberg.com/apps/news?pid=20601087&sid=aiblDY34F6I8&refer=home

  Comment by Anonymous Fan Wag — Friday September 19, 2008 @ 8:20am PST  Reply to this post

• Dear Hollywood,

  Don’t get too excited about this ‘bailout’.

  Where’s it going to come from? Printing more money or producing more product?

  You can forget tax revenues. Look at what happened to the highway fund, once people cut back on driving. Now running on ‘empty’.

  People who aren’t working, aren’t paying taxes.

  There will probably be around 100,000 more people unemployed by the end of the month due to the restructuring all of these companies will have to undertake. They get to join the millions who are already out of a job. The market will ‘adjust’ again.

  Want to look at a ‘real’ market? Go down to the local flea/farmer’s market. No, not the ritzy one in Hollywood, one out in the sticks.

  Everything is sold on a cash basis. No funny money, no plastic.

  Not only is business down, but prices are now around ten cents on the dollar.

  That’s true market value, not some bullshit sales job done by stock brokers or Uncle Sugar’s boys.

  The only items that are holding value are food and fuel. The two items that the government doesn’t take into account when figuring inflation. Too ‘volatile’.

  Everything’s fine, go on vacation.

  After all, the government, stock market, big business wouldn’t lie to us, would they?

  The roller coaster ride isn’t over. Tighten your seatbelt.

  Just make sure that it’s not wound around your neck.

  Comment by Tom Segerson — Friday September 19, 2008 @ 8:24am PST  Reply to this post

• Add me to the growing list of people and economists who think that this bailout, even in its massive, unprecedented scope, will not shore up the system. The bad assets are still out there. The government is just taking them on to unburden the private firms. If you set aside the obvious moral hazard of that situation, you still have the problem of those assets still being in the system.

  The do-not-short list is an embarrassment to free market capitalism. Basically it’s an artifical way of ensuring that the market only goes up. What kind of a free market can only move in one direction? But don’t worry, it won’t work. The smaller list of 19 do-not-shorts didn’t save those companies earlier in the year.

  Where was all this market intervention when the markets were on a tremendous upswing? Oh right, we don’t want to get in the way of that, even though it was that bubble that directly led to this inevitable downturn.

  Anyway, I will reluctantly swallow this dangerous bailout pill, but where the F are the regulations to keep this from happening again? Those should be the focus of any legislation.

  Comment by John — Friday September 19, 2008 @ 11:46am PST  Reply to this post

• Tom is right. If I were a roller coaster lover, I would have hated this week. True there are roller coasters, but the ride Wall Street took us on this week takes the cake.

  CNBC is reporting that there was a 2,000 point swing in the Dow this week and if that weren’t enough, Drudge is reporting that the bailout plan by congress and the President will cost $1 trillion and it only costs $1 billion to buy out the US Federal Reserve Bank.

  Now what we need to do is support a third party candidate that isn’t Bob Barr and get some new blood into Washington and truly clean up this mess.

  Comment by Jessy S. — Friday September 19, 2008 @ 11:50am PST  Reply to this post

• The whole thing that gets me, and maybe someone who deals with finance and economics on a daily basis can chime in here, is that after all of those rate cuts this year, the Fed came out last meeting and said that inflation is now a major concern. Then, at the beginning of the week, although they didn’t cut rates, they indicated they would to help this bailouts.

  Cutting rates would obviously be contrary to wanting to tame inflation worries, but what has truly happened over the past week that has suddenly allowed our government to pump all of this money from reserves into bailing out these companies without a HUGE inflation worry from all of the newly circulated funds? Am I misinterpreting this or was the fact that these financial institutions were failing not taken into account or not recognized by the Fed when looking at the overall economic climate? Is the economy even measurable at a reliable rate anymore given that it turned out all of these companies were leveraged based upon assets that seemingly were worth way less than claimed? Lehmann’s real estate marks were outrageously high, which obviously threw off their balance sheets and expections and played a major part in their downfall. Those marks seem to be the reason that Barclays did not want to even make a bid to buy them.

  I have found this week to be fascinating from the viewpoint of someont that loves economics and finance and politics, but completely frightening from the viewpoint of a taxpaying American with a 401k and a mortgage. Swings of 20 percent in the Dow is completely unnerving.

  And, John, I completely agree with your thoughts. The move to cut shorts is completely anti-free market.

  Comment by rufustfirefly — Friday September 19, 2008 @ 2:18pm PST  Reply to this post