crisis watch

M

man

it is difficult to say where things are heading from here.
it is definitely not over. we start year two of the crisis
with the collapse of 3 major players, FNM, FRE, LEH.
plus just in time sale of MER. plus AIG bailed out.

two questions: who is next? i would suppose there will
be a small series of small players going belly up and
firesold to competitors in both banks and insurers. not
because of recent bancruptcies, but for the same reason
they got caught. i believe many insurers will be forced
to show what is going in their hold to maturity portfolios.
and their will be plenty of structured credit.

second the oil price plays a crucial role in everything
IMO. it is the only thing that can keep inflation low and
the tools for the central banks in place.

i am astonished by the strong dollar and relatively weak
gold. and if there was any way to short the fed, i'd
love to do that.

what was missing in the crisis so far was the infamous
blood on the street. now there is. on wall street itself
it can get hardly worse. a new order of things is coming
there. i could believe that the current levels make banks
an attractive buy. the insurance sector might have
the worst still ahead.

broad index wise the next two years are at (very) best
sideways.

the VIX seems to find a center of peace pretty sharp
at 20, with some unrest lifting him to 25 and anxiety
to 35.

just some thoughts. please share yours, but stay at
topic if possible. thnx.
 
What I find interesting is that the major calamities in recent weeks - unlike 1990 - seem limited to big cap financials/banks/brokers. The KRE (regional bank) ETF is up 61% from its July panic lows and now down a mere 0.8% YTD.
 
Quote from makloda:

What I find interesting is that the major calamities in recent weeks - unlike 1990 - seem limited to big cap financials/banks/brokers. The KRE (regional bank) ETF is up 61% from its July panic lows and now down a mere 0.8% YTD.
More...
puzzles me too. i can't believe we will not see a chain
of reactions. maybe even months from now. defaults
in smaller caps must go up IMO. weird, if this was a
big-cap-crisis only ... yet i am not sure if we necessarily
see all the activity that is going on. we saw different
regional US banks belly up and swallowed by others.
it could be that in other sectors, which were not so
much in the spotlight, we (at least) simply don't know.
 
Quote from Kap:

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/how_banks_depend_on_aig.html
More...
great link. the article perfectly illustrates the difference
between LEH and AIG. the interesting thing with AIG
is that on the one hand nothing has happened. i wonder
what their rating will be since they are now a public
institution ... cant be any less than AAA i guess. so all
the pressure on this side has evaporated. needless to
look at anything AIG related anymore. this is now a
branch of the US government.

the real issue who is next, since the AIG problem is
the first big question mark behind a whole bunch of
insurances, who (at least i guess so) have tons of weak
credit on their books.

i am not an expert, but the impact of insurances on
the consumer is different from a bank. privates
will not stampede into the offices. nevertheless the
indirect effect, as pointed out in the article, could be
even worse. but that is probably limited to the top
houses, which by no means must go belly up.

governments around the globe will save the major
insurance corporations, but will not care about small
and medium ones. that means big increase in public
debt. if all this does not spell world wide recession
what could?
 
the market gets rid of wall street. the end of capitalism
as we know it. will not happen. just happened.
 
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