Currently we have about 6 trillion $$$ in global liquidity parked in very low yield investments. No major players are willing to touch anything...
I'm not much on David Smick but I think he nailed this one on the head earlier today...
"In recent years, our banks, borrowing to maximize the leverage of their assets at unheard-of levels, produced mountains of financial paper instruments (called asset-backed securities) with little means of measuring their value. Incredibly, these paper instruments were insured by more dubious paper instruments.
Therefore, the housing crisis was a mere trigger for a collapse of trust in paper, followed by a de-leveraging of the entire global financial system. As a result, we are experiencing the painful downward reappraisal of the value of virtually every asset in the world."
I think that Monday will tell the tale for the short term. We saw the snap back rally get thumped so either things will stabilize as "smart money" decides a defendable position has been reached or the buy and hold pundits will cave in and a whole new herd will head for the exits. Given the record level of borrowing by commercial banks this week I think we'll see a round of forced sell-offs as more banks continue to bleed out due to bad paper. If so then the big $$$ players will be sitting waiting to snap up bargains as the mid tier players are forced to consider reallocating assets. If it doesn't hold at ~7200-7500 I think it'll free fall dramatically again.
Sadly we're stuck with idiots on all sides. McCain had the right idea before he caved in, had we simply decided to buy the underlying assets at a corrected value then we get a written down value on the underlying asset (not that this is all mortgage related) and you can find a bottom of sorts. Now he simply is making the buy out even worse by completely selling out to special interests over sound policy. In effect he is now a worse option then "the other guy"...as horrifying as that thought is...
