Top Line: The buyers were timid again on Monday with the Dow only ending up about 50 points when it seemed like it wanted to go up more. The market is heavy but still trying to go up. With the end of the month here, there could be some strength going into Friday's jobs' report.
Monday's media didn't spend too much time on the Paulson proposal and with good reason...there doesn't seem to be much punch to it. Our perspective is our post for the evening. We are watching the stock market with a great deal of...well, let's call it...patience. While we wait, let's discuss some of the fallout from the mortgage crisis.
Paulson's proposal is an effort to calm the credit markets which are still in a little bit of stress. We realize that this path is the one we were destined to be on when the real estate bubble started to get pumped up. There really was no other way to go. What are we refering to?
That would be the "new" idea that we close the barn door now that the horses are gone. Another way to put it is that the government will have another chance to beef up its regulatory might. So, where were the regulators when these problems first surface? Yes, a rhetorical question because we know they were asleep at the wheel or more to the point driving without a license.
We apologize for the sarcasm but as long as the housing prices were going up and interest rates were low, everyone was smiling. Now that the housing market is slowing or falling, the government thinks it needs to do something...regulate something. What we are going to get is an attempt to stop all of this from happening again. We shouldn't have to say this but This is not going to happen again in a long time. The mood of the people is changing to a less speculative attitude.
The world sees the Greenspan put transforming into the Bernanke put with a twist...this guy is serious about liquifying the system. The market is supposed to be a Free market with the ability to go up an down to reflect what is going on in the real world. Everyone is afraid of what might happen if the stock market would go down. They didn't seem to mind the real estate bubble getting bigger and bigger. Now, they think it is easy enough to put Humpty Dumpty back together again.
How do they think they're going to do this? Regulations. We're the government and we're here to regulate now that the problem is well out of hand.
Update readers' homework...Roger Lowenstein wrote an article for the NY Times which we thought would be a good read for you.
FSI: 74.53 (not a strong showing for the all powerful Horsemen, down about 30% on the year)