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On CNBC right now. Not saying that I agree with him, just sayin'. I do feel as if there is something beyond the downgrade that is not being said and I think it's Bank of America that will either not last the year or have to be bailed out again.
I think that the downgrade was telegraphed well in advance, but most gurus didn't think that it would actually happen. Now that S&P has downgraded the U.S., fear has taken over the markets. Nobody knows how long this will last, it seems that October has arrived early this year. : )
I have no idea if there's more to the downgrade than what's already been said, we'll just have to see. Ditto for more bailouts i.e. we'll just have to wait and see.
Corporate earnings have been great, but only after companies laid-off so much of their workforce. If another recession comes, there won't be anyone left to furlough.
Bank of America (BAC) has problems specific to them that are not shared by similar financial institutions. Specifically, they have inherited the questionable loan portfolio from Countrywide Credit and are now being sued by AIG for fraud and deception regarding the mortgage products BAC/Countrywide sold to AIG. The suit appears to have substantial merit and, if successful, may well result in the collapse of BAC.
That said, a problem that has NOT been addressed is that all of these financial institutions still hold hundreds of billions of dollars of worthless financial products and this has been conveniently ignored. TARP and all of the other alphabet-soup rescue programs simply kicked the can down the road and have permitted these zombie institutions to blithely continue on their merry way. All the pundits that have insisted that "we are not Japan" may be whistling in the dark. This is precisely what Japan has done (or not done, I should say) and they have never permitted any of their bankrupt financial banks and institutions to go under, resulting in nearly three decades of denial and stagnation. We may well be embarking upon the same troubled path.
Dr. John Hussman has made these points repeatedly from Day One and he eloquently explains why all of these bogus programs (TARP, QE1, QE@, etc). are doomed to fail and have achieved nothing aside from increasing our debt load to dangerous levels. Until the worthless debt and financial sausage the Masters of the Universe on Wall St. still hold are restructed and their bondholders take a severe haircut instead of receiving taxpayer money to make them whole, this problem will not disappear.
Comments
I have no idea if there's more to the downgrade than what's already been said, we'll just have to see. Ditto for more bailouts i.e. we'll just have to wait and see.
Corporate earnings have been great, but only after companies laid-off so much of their workforce. If another recession comes, there won't be anyone left to furlough.
That said, a problem that has NOT been addressed is that all of these financial institutions still hold hundreds of billions of dollars of worthless financial products and this has been conveniently ignored. TARP and all of the other alphabet-soup rescue programs simply kicked the can down the road and have permitted these zombie institutions to blithely continue on their merry way. All the pundits that have insisted that "we are not Japan" may be whistling in the dark. This is precisely what Japan has done (or not done, I should say) and they have never permitted any of their bankrupt financial banks and institutions to go under, resulting in nearly three decades of denial and stagnation. We may well be embarking upon the same troubled path.
Dr. John Hussman has made these points repeatedly from Day One and he eloquently explains why all of these bogus programs (TARP, QE1, QE@, etc). are doomed to fail and have achieved nothing aside from increasing our debt load to dangerous levels. Until the worthless debt and financial sausage the Masters of the Universe on Wall St. still hold are restructed and their bondholders take a severe haircut instead of receiving taxpayer money to make them whole, this problem will not disappear.