-- Posted Wednesday, 17 October 2007 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Wednesday, October 17, 2007
“Phenomenally accurate forecasts”
Once again, stocks failed to recoup the day’s losses with the final-hour stampede of short covering that has become a tradition at the NYSE. We’ve grown so accustomed to the Daily Goosing ourselves that when it fails to occur, as was the case in the last two days, we start to worry that something is amiss. But what? Why would Wall Street bulls have any doubts about taking the plunge, given the spin-control lollapalooza that has been orchestrated so beautifully over the last couple of months by the central banks?
Most recently, we saw Citigroup call for a $100 billion interbank fund to shore up the market for so-called SIV’s, or structured investment vehicles. Have investors become so fretful that they are now questioning whether this sum will be adequate? Granted, the notional value of financial derivatives on the world’s books is headed toward $600 trillion. But it’s not as though all of it is going to get marked to market one day, right?
Or will it? We can’t help thinking not only that it will happen and that it is inevitable, but that the supposed collateral will be found seriously wanting by lenders suddenly turned discerning. In the meantime, with the central banks’ PR offensive revved to the max, it’s a wonder that the stock market would ever suffer a down day. Take yesterday, for instance. Treasury Secretary Paulson, speaking at Georgetown Law School, was so winningly earnest in discussing housing-sector troubles that the Wall Street Journal used the word “sobering” to describe the speech. "The ongoing housing correction is not ending as quickly as it might have appeared late last year," said Paulson, "and it now looks like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet."
Why So Glum?
Why so glum, Mr. Secretary? Wasn’t it just reported that consumer spending grew at a robust clip in September? Can $100-a-barrel oil hurt us if $85 oil has not? And what about the stock market? The Dow Industrials are within two percent of all time highs. Housing slump aside, what better evidence could there be that America’s economy is as robust as ever?
Of course, as a growing number of Americans must realize, it is only Paulson and his fellow policymakers who believe this stuff – along with guys like Kudlow who make a living pretending they do. As for the rest of us, the Dow’s close proximity to record highs is a sign only that Wall Street has gone crazy. Or rather, crazier than at any time since 1929. Paulson says it will take longer than originally anticipated for the housing market to right itself. That’s what politicians said as the Great Depression dragged on for a decade. How spin control is going to stimulate another real estate mania – and nothing less can slow the juggernaut of a devastating debt deflation -- is beyond imagining. With the holidays approaching, perhaps it’s better that we pretend for a little while longer that our leaders have all the answers. That they do not can only become increasingly apparent in the weeks and months ahead. In the meantime, we can only pray that the stock market does not spoil the illusion with a long-overdue epiphany.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2007, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 17 October 2007 | Digg This Article | Source: GoldSeek.com
