Here We Go Again....

Monday, March 23, 2009

Here we go again. (Sigh)

Another weekend, and another attempt by the authorities to bolster sentiment, restore confidence, and support equities. This time, it's the US bad bank plan. The authorities are so excited about this one that they made a special announcement over the weekend to tell us that...err...they are making an announcement today. Hurrah!

You can hardly blame the Federales, though. The market still bites at the holographic carrots offered up by the Fed and the Treasury; S&P futures have traded up more than 3% at one point this morning. But if this program is going to make a important contribution towards solving the crisis, it will have to be a bit better than the hints that Geithner drops in today's WSJ. Heavy on platitudes and light on details, Macro Man can see nothing there to suggest that the PPIP will be any more successful than the TALF (after a 2.35% take-up, the latter has changed its name to "That's Another Laughable Failure")

One of the problems with Congress' excise tax solution to the AIG bonus scandal is that it renders the private sector a little, ahem, nervous about going in to partnership with the government. After all, what would stop the Feds from going after the profits that firms made in the PPIP (PIMCO, Blackrock, and GS excepted, natch)?

Perhaps Geithner may wish to ask Londoners how well their version of a Public-Private Partnership has worked, both financially and service wise. (Hint: it rhymes with "not very.")

So there you have it. The US Treasury has come up with a plan similar in spirit (or at least name) to one foisted upon London by the wretched "Red Ken" Livingstone. Why does Macro Man have the feeling that after this plan is launched, equities will tank and we'll all be saying "here we go again..."?

Finally, thanks to all for the radio station recommendations. The early returns have been promising.

Posted by Macro Man at 8:06 AM  


Actually Red Ken preferred to raise money for LU via bonds -- the PPP was a central govt. initiative which he argued against. Perhaps a few friendly palms needed to be greased? I happen to think bonds (with implicit govt backing) might have been a cheaper way to raise capital at the time.

Hope you catch the worm today...

t said...
8:54 AM  

OK, I stand corrected...I was out of the UK when it went through. Not that coat-tailing the Labour Party government's public services programs is any better than following Red Ken...

Macro Man said...
9:23 AM  

This plan looks like another blow to the dollar. More money printed.

Yohay said...
9:54 AM  

the treasury doesn't print money...

Anonymous said...
10:14 AM  

cha ching for M-M as the oil gal on cnbc states and 'market alert' below her on screen:
'december oil over 70'

quite a few sites over weekend talked the 38fib off lows at 76.5
range 33-147

yeah gold can't seem to go down on 'printing presses rolling' again
GLD SLV new all time record tonnage friday clsing data

Anonymous said...
1:44 PM  

My father's family name being Pirrip, and my Christian name Philip, my infant tongue could make of both names nothing longer or more explicit than Pip. So, I called myself Pip, and came to be called Pip.

Anonymous said...
2:22 PM  

SO presumably the market is Estella. Who's Magwitch?

Macro Man said...
2:24 PM  
This comment has been removed by the author.
Corey said...
3:31 PM  

99.5 FM in Denver, CO ("The Mountain")

Yossarian said...
4:14 PM  

any opinion on crude here?

Anonymous said...
4:57 PM  

I'm still long.

Macro Man said...
5:02 PM  

Please do not say tmw "big rallies only happen in a bear mkt". They happen at the end of major bear mkts too(I AM NOT SAYING THIS IS IT).

Anonymous said...
7:21 PM  

Anyone wishing to thump their chest and proclaim "the bull is back, baby!" is more than welcome to pour whichever funds they like into equities.

Me, I continue to believe that the credulity of the market whenever a policy initiative is announced is indicative of future losses.

And while the '32-33 period may have been a "bull market" based on a statistical definition, it's amazing how little you read about the fortunes made when the Dow nearly tripled...perhaps because it retracred such a negligible portion of the earlier losses.

Macro Man said...
7:56 PM  

what would be the implications to chinese SDR proposal? don't see how it's different to gold standard.

hopefully anon said...
8:34 PM  

There aren't enough SDRs to accomodate all the mercantilists who want to keep accumulating reserves. Their concern about the $ is a good thing, as it provides a disincentive to continue their behaviour.

As for the UN panel recommending the end of the $ as a reserve currency....well, all you need to know is that the guy behind it is an absolute moron who a) has been bearish USD for years and years, b) briefly ran a hedge fund where that view blew him up in near-record time, c) hasn't been able to latch on with anyone else because he is such a clown.

His opprobrium is the best endorsement the USD could get.

Macro Man said...
8:56 PM  

The bad bank plan, combined with future capital injections to help offset future bank writedowns (which they have hinted at) and the recent Fed announcement will effectively eliminate or substantially reduce the primary driver of the stock crash: forced selling from the primary dealers.

Major resistance was breached today. Sell offs should be limited in the coming months until it the picture becomes clearer. I imagine geithner and company just bought themselves a few months of relief.

I'm interested to hear what people have to say about the Euro...while fed actions may really hurt dollar, did europe's problems just disappear?

Kevin said...
9:23 PM  

Come now, MacroMan. You were wrong about the market's read of Geithner's plan. Be a sport.

It's a very expensive way to go about it, but there is some atom of rationality behind it. Because it is profitable for a party with a low discount rate to lend to a party with a higher discount rate, it is possible to use that to diminish the required capital gain for breakeven. In other words, if the private investors can borrow from the government, they can profitably make a higher bid than they would otherwise for the distressed assets. That allows all holders of similar assets to book them at higher value than current mark to market would allow. If, and this is the big if, the assets can then be re-sold and the government can recycle the proceeds, they can move all the distressed assets from level 2 into level 1. They can also probably gradually force many Level 3 assets to be written off.

It would be much cheaper to give the money to mortgage holders and credit card holders and let them pay off their debts. This would fix (and maximize) the value of the distressed assets and let all the CDS expire worthless. But giving money to people, unlike giving the money to investment banks would be "socialism."

Or something.

--Charles of Mercury Rising

Anonymous said...
3:58 AM  

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