Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: SliderOnTheBlack who wrote (6284)	9/5/2007 12:18:50 PM
From: jim_p	Read Replies (1) \| Respond to of 50749

It’s all about confidence!!! The biggest single change that has taken place in recent weeks that will affect the economy/stock market going forward is the way in which all credit was created, packaged and sold. This current system of packaging up large amounts of mortgages, credit card obligations, auto loans etc started after the S&L crisis of the 80's and has become more aggressive over time with more creative layers and more aggressive credit ratings. As time went on the system became more and more aggressive and they were able to do this as long as there were no recognized failures in the system. The system only worked as long as there was confidence in the system, and it was the system that allowed for WS and mortgage brokers to extend credit where it shouldn't have been placed. The thing we must recognize now and going forward is that the confidence is gone and it won't come back under the current system. A new system will need to be created and that will take time to generate and for the markets to accept. This is a very long time process and the credit crunch will continue until a new system is in place and accepted by the markets. The same is true for money markets and asset backed CP as long as there are no major failures the system works, but as soon as there is one major failure the confidence is gone and it's time to start over with new rules. It was the excess credit that resulted from the current broken system that drove the current economic expansion and bull market. There is only one thing you need to remember going forward......THIS HAS NOW CHANGED AND IT'S NOT COMING BACK UNDER IT'S CURRENT STRUCTURE ANY TIME SOON. JMHO, Jim