QuotesToSave
[T]he Federal Reserve's abrupt decision to cut interest rates on Oct. 15 was not so much due to concerns over a slowing economy or credit crunch.... It was a response to an immediate meltdown threat of the banking system.... The Oct. 15 ease, on top of the recent surge in liquidity available to banks, reportedly came after urgent requests from the president of the Federal Reserve Bank of San Francisco, who told Federal Reserve chairman Alan Greenspan of extraordinary demands by one member bank in its region.... Reliable sources indicate that this.... had been provoked by a credit squeeze in the interbank market against Bank of America. Bankers believe that the bank's troubles are far more serious than what is being told to the public.... The grave danger on Oct. 15 was of a breakdown in the interbank payments system, which could have easily led to a global systemic collapse. While investors around the world rejoice the Fed's action by outrageously bidding up stock prices, the more alarming message is that the emerging markets crisis has now fully reached the G7 financial systems. - Paul Lam [Nick's comment: I am not a fan of "reliable sources", who are often plants used to push a particular agenda, but this explanation does seem plausible to me.]
Who would have ever thought that the Fed would be cutting interest
rates with the S&P 500 P/E ratio actually higher than it was when Alan Greenspan gave his famous "irrational exuberance" speech? - Marc Sexton
We strongly suspect there is now direct intervention by the Central Bank of Japan in supporting the Nikkei at the 13,000 level. We also suspect direct intervention by major Wall Street firms (if not the Federal Reserve itself) in supporting the U.S. stock index futures market. Only that could explain the internal divergence. This market is literally crumbling from underneath the DJIA. We feel that WHEN (not IF) the DJIA breaks under 7500, it'll be like a hot knife slicing through butter. - Jim Stack
Alan Greenspan said last week that he hasn't seen anything like this before. He was talking of course about the risk premium that the market had swiftly imposed on anything but the safest interest rate instruments. But what he is conceding is that there is systemic risk. In such an environment there will inevitably be an increasing premium placed on capital preservation. - Greg Pickup
I do think there is a structural issue in trying to deal with the tendency of markets to go to extremes. - Robert Rubin [U.S. Treasury secretary]
So, the solution to a glut of liquidity that caused speculative booms around the world which have now mostly gone bust is...MORE LIQUIDITY! It reminds me of being a kid and staying out too late. You know you are in trouble when you get home so your might as well make the most of it while you can. Of course the later you got home, the more trouble you were in! It looks like the Fed won't get home until dawn. - Marc Sexton
It is appropriate to ask whether a gargantuan dose of easy credit can conceivably cure a global sickness that itself was caused by loose money. - Rick Ackerman
The U.S. has repeatedly criticized Asian countries for the close cooperation between government and industry. Treasury officials have argued against crony capitalism and the use of the "convoy system" to protect companies from bankruptcy. Yet the Federal Reserve in using strong-arm tactics to muscle the banks and brokers into bailing out LTCM have resorted to exactly the same tactics. In doing so the US has lost whatever moral high ground it still occupied. This has proved to be a classic example of the pot calling the kettle black. - Greg Pickup
The lack of professionalism among funds and banks that have cried for free markets on one hand and demanded IMF guarantees on the other has set our financial community up for a very serious fall. - Martin A. Armstrong
...we have had a market correction rather than the start of a bear
market.... Prepare for a market that will rise 25% to 40% in the next 18 months. - Kenneth Fisher [One of this month's candidates for the Irving Fisher PHP Award for 1998.]
In my opinion, the U.S. stock market is clearly back on track! The major catalyst that has brought us to this point was the decision by the Federal Reserve Board to lower interest rates and, more importantly, add reserves to the system.... The Federal Reserve has acted decisively, and it is more than likely that Mr. Greenspan will abstain from any further interest rate cuts provided the U.S. economy remains on an even keel. - Joe Battipaglia [Another PHP candidate.]
What president cut taxes four times, reduced the national debt by a third, and reported budget surpluses every year in office? Calvin Coolidge. Not too many months after he left the White House, the country was plunged into a depression -- something that has happened every time America has significantly reduced its national debt. - Sam Smith
The bull market in stocks is over because the credit bubble has burst. Lower short-term interest rates and an attempt to print money will not revive it. The easy money that fueled stock markets around the world has dried up, and the deflationary forces that accompany the bust side of the boom will swamp government monetary and fiscal policy until the excesses are wrung out of the economy. - David Tice
Forget all the recent bunkum about 'paradigm shifts' and 'globalization.' When speculation outruns sensible investment - such as recent 30% annual returns from stocks - the Grim Reaper of economic reality always steps in. The go-go era that began in 1991 is over.... Risk, a word that has largely disappeared from our vocabulary when talking about investing or personal behavior, will again become current. - Eric Margolis
Sometimes, stuff happens. Bad stuff. Economists will retroactively explain why it was a matter of a policy failure, after they have lost everything, just as Yale's world-famous economist, Irving Fisher, lost his wife's inherited fortune in the Great Depression, after forecasting in September, 1929, that there would be no reversal of the stock market. Economists explain why something happened, not what will happen. If you doubt me, ask the two 1997 Nobel Prize-winners who were on the board of Long-Term Capital Management, which pushed 16 of the world's money-center banks to the brink of disaster last month. They will be able to tell you exactly what happened. They may even get it published in an unreadable scholarly journal. They just were not able to forecast it. - Gary North
The financial world is overseen by three great economic powerhouses. Japan is overlord of Asia's finances. Western Europe dominates East Europe and Russia. The US's bailiwick is Latin America, Central America, and the Caribbean. Japan, mired in deep recession, has failed miserably to defend Asia. Europe has done no better in Russia. If the United States fumbles its financial manifest destiny in Latin America, head for the storm cellars. - Eric Margolis
>Recent disastrous economic statistics, totally contrary to the unrealistic and virtually untruthful past representations of the Japanese economy by the Japanese government, show a virtual collapse of private investment and private consumption that will not soon be arrested.... The global economy has entered an ugly "shrinking pie" phase: increasingly desperate emerging economies can benefit only at the expense of other emerging economies. - John H. Makin
I tell you - with a broken heart - the next three months are going
to be ominous and shattering here in America. A full-blown depression is soon coming to this nation and the whole world. It cannot be avoided. America and the world are now leaderless. We could be closer to the end than any of us could imagine. - David Wilkerson
During this new stage [1930] of the depression, the refugee
gold and the foreign government reserve deposits were constantly driven by fear hither and yon over the world. We were to see currencies demoralized and governments embarrassed as fear drove the gold from one country to another. In fact, there was a mass of gold and short-term credit which behaved like a loose cannon on the deck of the world in tempest-tossed era. - Herbert Hoover
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