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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (31005)	3/15/2008 10:20:59 PM
From: prosperous	Respond to of 217591

Some of the actions show hope. It seems based on President Bush's recent speech on "not over-correcting" they are letting housing correct on its own without bailing reckless/speculating owners out (hope they do what they are saying), either because they think its right thing to do or because they possibly see it as too big an effort and the resources better used for bigger issues like bailing the failing banks/brokerages. This is a step in right direction in reverting asset prices to mean, although democrats seem overenthusiastic in bailing troubled houses which scares me for the future (hopefully most of the housing correction happens while Bush is President). Next right step would be to let the stock markets correct significantly over next 6-8 months so those values gravitate to mean and assets become investment worthy again after the speculation is eliminated; the fed/govt should avoid temptation to support stock market valuations and that would be second step in the right direction. After these two valuations have corrected, fed needs to start raising rates to curb inflation (and not cut more further weakening the dollar and letting inflation go out of hand until they can raise rates). That would bring asset values in attractive range again and make dollar usable paper. Doing this will require pain, job losses, asset value vaporization etc but will be necessary and happen one way or the other. The govt would do best to stay out of the corrective process. Bailing out failing banks is a big problem, on one hand you can argue its necessary to keep the trust in the system (counter party risk etc) on the other hand if a crack in this mechanism starts a chain of fire crackers would be hard to control and can create a huge hazard that can quickly get out of hand leading to a hard landing which they have been trying to avoid in the first place. Overall I am encouraged that the govt is letting housing correct on its own, mys suspicion is other assets will follow, its in USA's best interest that most of the asset price correction happens while the current administration in place: that allows the new admin to start rebuilding the process from bottom (which may take some time), a relatively easier problem that trying some desperate measures to rescue economy somewhere in the middle of the asset value correction process and any mis-steps there would bury them deeper in the doodo for long time. The correction process may not look very good for current admin happening under their watch but at this point they have little to lose and should let it happen in the best interest of the economy and future.