Bernanke Fiddles While Wall Street And Investors Burn

[FaninAma]

What is the deal with this guy? What is his purpose in allowing the stock market to be devestated by the ongoing sub-prime mess and recession headed at the economy like an out of control Mack truck?

I don't think he's worried about inflation. I think he is carrying water for the bond market....specifically the foreign owners of bonds. Which means he is willing to let the American investor lose billions and billions of dollars in their 401Ks to keep the Japanese and Chinese governments happy.

I am not in margin and I am very diversified so I'm in better shape than most but the idiots at the FED are going to nuance this crisis into a huge problem.

[Position Limit]

do you think a cut in rates is the life jacket this market needs? since when is it the fed's duty to save wall street? you better diversify a lot more because a .75 bps cut aint gonna put a bid in this garbage. you need to bone up on the fed if you think bernake isnt worried about inflation. if he's not, the market sure as hell is. good luck.

[FaninAma]

do you think a cut in rates is the life jacket this market needs? since when is it the fed's duty to save wall street? you better diversify a lot more because a .75 bps cut aint gonna put a bid in this garbage. you need to bone up on the fed if you think bernake isnt worried about inflation. if he's not, the market sure as hell is. good luck.

You need to bone up on history and learn what the real catalyst was for the reat Depression. I'll give you a little hint....it wasn't Hurbert Hoover or irrational investors. It was a overly tight monetary policy by the then chairman of the Fed.

What I expect the FED to do is to be ahead the curve on the unfolding sub-prime liquidity mess. I expect them to look at the spiking December unemploymant numbers and understand that there is a hell of a recession headed this way.

I expect them to lean toward helping the private investor, home owner and worker and not the forein holders of US bonds.

I expect them to be a part of the solution and not part of the problem.

And the reaon FED cutting at this point is likely to be ineffective is becasue they've been acting all cyute and worrying about the price of the USD since August. If they had been aggressive for the past 6 months I think there would be an entirely different market climate right now.

But instead they've been playing grab *** with tiny reductions at the discount window and offering hokey schemes like the one cooked up with the European Central banks a month ago that fell flat on it's face. And they have been totally inept in their press releases which have spooked the market even more.

At this point they have no one to balme for their ineffectiveness than themselves.

But, hey that's OK. As long as the foreign holders of US treasuries are happy, the US homeowners, investors and taxpayers can rot in hell as far an the FED is concerned.

BTW, how do you think the 401K of the average Joe Blow has done over thepast 12 months? Not very very well.

Thsi country faces a real risk of a significant deflationary collapse. A littlle inflationary pressure would look like a walk in the park compared to the pain that an extended deflationary period would cause.

Feel free to respond with another flippant post.

[MextheBulldog]

I blame Cheney. Where has he been hiding?

[Position Limit]

there was no froth in equities in 1929?
have you gotten a market on gold lately? grains? do you know why we are in this mess right now? i personally feel that there is big inflation risk out there right now combined with the beginning of a recession. recession this country can deal with, not runaway inflation. i think the market feels the same way. further debasement of the dollar will only make matters worse. i just dont think it's as simple as cutting broker dealer rates back down below 2%. stagflation is upon us, last time u.s. economy faced this, i believe volker hiked rates to double digits. whatever. econ minds much smarter than myself put forth evidence of greenspan's acquiescence to wall street is what put us on this collision course in the first place. sorry if i came off flippant, but i just dont think bernanke is going to be able to get us out of this mess. at least not without a lot of pain first. also, i would'nt be so fippant about foreign government holding treasury debt. peace.

[jkjsooner]

What I expect the FED to do is to be ahead the curve on the unfolding sub-prime liquidity mess.

Greenspan helped create that mess to begin with with the ultra low interest rates and lack of leadership on lending guidelines.

At least Bernanke has a backbone. And it is absolutely not the Fed's job to prop up Wall Street.

[jkjsooner]

I expect them to lean toward helping the ... home owner

What about the renter who has seen that asset class triple in 7 years? So we'll help out home owners who either bought something they couldn't afford or HELOC'd their way into debt.

If any other asset that we all needed tripled in price in 7 years the fed would have gone crazy trying to control the prices and the media would be screaming about the inequity of it all.

Give me a break, we had incredible performance out of that asset class and as soon as it retreated slightly (exposing all the filth) everyone starts screaming.

[SCOUT]

Call me shocked that a Fan thread has negative economic news.

[SanJoaquinSooner]

BTW, how do you think the 401K of the average Joe Blow has done over thepast 12 months? Not very very well

Double digit inflation is much more serious to a long term investor than a 15 or 20 percent correction, or occasional recession. recessions once or twice a decade help wring excesses out of the market. it is unfortunate that some individuals face hardship but overall, in the aggregate, the u.s. economy is studly.

12 months is nothing for a 401k - just a smal blip on the screen.

[Position Limit]

fyi, bernanke is speaking to congress right now.

[OklahomaTuba]

This thread isn't complete without at least one soup line picture...

http://www.elderweb.com/sites/elderweb/files/albums/history/acoffee_sm.jpg

[FaninAma]

Double digit inflation is much more serious to a long term investor than a 15 or 20 percent correction, or occasional recession. recessions once or twice a decade help wring excesses out of the market. it is unfortunate that some individuals face hardship but overall, in the aggregate, the u.s. economy is studly.

12 months is nothing for a 401k - just a smal blip on the screen.

Yes, the 30's were just one big party for everyone from Wall Street on down to all the Okies who tripped out to California and never came back.

The problem with a deflationary period is that once the vicious cycle of credit/debt default starts there is no guarantee that it will be limited to just those that started it.

I agree that Greenspan was irresponsible in his response to a slowing economy and all of his loose money policies coupled with Bush spending like a drunken sailor contributed heavily to the situation we find ourselves in now.

A drug addict that goes cold turkey has a significant chance of dying during withdrawal before kicking the habit. If Bernanke persists in slow-playing this and allowing the economy to go cold turkey off of easy credit it very well could kill the economy.

There are tens(if not hundreds) of trillions of dollars of credit derivatives that could unwind once that debt pyramid starts collapsing. I don't think any of you who advocate letting this thing just play itself out really realize how ugly it could get if those trillions of dollars of credit based derivatives start collapsing. Suffice it to say that some of you who think Bernanke is doing the right thing will be cursing his name as you stand in the unemployment line.

Greenspan was much more concerned with deflation than inflation. I think he was correct in his feelings. Deflation is a much worse economic condition than inflation and it is much, much harder to reverse once it gets started. Greenspan's mistake is that he was so afraid of deflation that his monetary policies were too lax which led to speculation and the creation of credit and housing bubbles.

Now Bernanke is coming in and he is determined to do the opposite of Greenspan. I think he is running the risk of throwing this economy into a severe recession of not deflation. He should be doing everything he can to let the air out of the credit and housing bubbles slowly....not letting it explode all over the US consumer and taxpayer.

If the credit card bubble plays out the same way the housing and mortgage bubbles are playing out it will be a lot longer than 12 months before you can look at your 401K statement without crying.

[FaninAma]

Call me shocked that a Fan thread has negative economic news.

So can you find anything positive in the fact that the Russel 2000 is 20% off its July highs(and falling), the Nasdaq is 15% off(and falling) and the Dow being 13% off (and falling)?

Also consider the fact that Merrill Lynch, Citicorp, and other financial institutions are lining up to write of billions and billions in bad debt while also understanding that the consumer debt crisis is just starting to rear its ugly head and I will give you a gold star for optimism if you're not worried a least a wee bit.

And oh, just make to your day brighter, it is estimated that real estate prices, the biggest source of private wealth and savings in this country, are expected to fall by 25 to 30% before leveling off. And remember, equity in homes is what a lot of consumers used as collateral to obtain more credit(ie debt.) Not a pretty picture is it?

[Chuck Bao]

Wait...I'm confused. Are we talking about deflation or inflation, or both? Bernanke can't be expected to help us with both.

[1stTimeCaller]

I could make some crack about the Baby Boomer Generation but I won't.

[Chuck Bao]

I got in on the tail end of that generation, so don't you dare.

[1stTimeCaller]

;)

[1stTimeCaller]

:D

[SCOUT]

So can you find anything positive in the fact that the Russel 2000 is 20% off its July highs(and falling), the Nasdaq is 15% off(and falling) and the Dow being 13% off (and falling)?

Also consider the fact that Merrill Lynch, Citicorp, and other financial institutions are lining up to write of billions and billions in bad debt while also understanding that the consumer debt crisis is just starting to rear its ugly head and I will give you a gold star for optimism if you're not worried a least a wee bit.

And oh, just make to your day brighter, it is estimated that real estate prices, the biggest source of private wealth and savings in this country, are expected to fall by 25 to 30% before leveling off. And remember, equity in homes is what a lot of consumers used as collateral to obtain more credit(ie debt.) Not a pretty picture is it?
I have concerns about the economic future but there are always things to worry about.

I was commenting on the fact that when I see a thread you started there is almost always a dire message in it.

[FaninAma]

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My, my my. What a rosy picture. And that's with the "good news" of help on the way in Bernanke's speech.

At this point the FED is so far behind the curve that they will have to cut lending rates far greater to have a positive effect than they would have if they had acted sooner.

[1stTimeCaller]

Jeebus, it's a market. They do go down. That's why investing is risky. Settle down.

[Chuck Bao]

I'm dying here.

I was going to sell my shares to buy my dream condo.

I can't now.

I'm just going to have to work until I'm 90 and work on stock market commentary from my death bed. I will be bitter until the end, I'm afraid.

[Curly Bill]

I won't be retiring anytime soon. I'd personally like to see the market take a dive, then I could buy me some more stock on the cheap. Plus this is doing wonders for my gold and silver holdings, limited though they might be. I do need to sell a house though so I'm worried about that.

[Position Limit]

fana,
dude i think you're confused. definately all over the map. you want or think the fed has the power to unwind an overcrowded trade (housing market) in an orderly manner? if you're that concerned about your $40,000 in you're 401k then this could have been avoided on your part last december. every market indicator and protaginist was telling you this was going to happen. waiting on the fed throw you a bone is a sure way to lose. if you so adament about this, how much gold are you long?

[FaninAma]

Jeebus, it's a market. They do go down. That's why investing is risky. Settle down.
http://www.cnbc.com/
When was the last time you witnessed a 20% correction in the market? That's right, after 9-11. And what did the FED and gvernmant do to stave off a debt collapse then?

Like I've tried to explain, cyclical downturns in the market are expected. I don't think we're dealing with that. The problem is that government intervention and instiutional manipulationof the markets have turned a normal cyclical dowturn into something that I feel will be much more severe now that the FED has decided to almost on a dime change their monetary policy.

This downturn, I fear, will be a true-life deflationary nightmare. In other words, it will eventually become a wealth killer, an asset killer and a jobs killer.

Once the trip wires on the derivative meltdown are set off it will get as ugly as an aggy's girlfriend.

[FaninAma]

fana,
dude i think you're confused. definately all over the map. you want or think the fed has the power to unwind an overcrowded trade (housing market) in an orderly manner? if you're that concerned about your $40,000 in you're 401k then this could have been avoided on your part last december. every market indicator and protaginist was telling you this was going to happen. waiting on the fed throw you a bone is a sure way to lose. if you so adament about this, how much gold are you long?

Dude, I've been very consistent. You're the one confused so I'll type a little slower and use smaller words.

The FED and the government created this problem with an overly loose monetary policy and poor regulation of the lending industry but now Bernanke and the FED are just throwing up their hands and telling investors to just eat cake as the markets meltdown.

You cannot have the spiggot open full force in creating the bubbles and then when problems arise try to use tough love to cure the problems. Again, read the history of the FED and the role they played in the Crash of '29.

Do market and lending reforms need to be instituted? Most certainly.

But until this can be done and some of the effects can be seen you cannot run the risk of a huge market and derivative complex meltdown. You use every bullet in your gun to make sure that fulminant process doesn't get going.Once that chain reaction gets going it will not be stopped.

But that's OK. A massive credit collapse could never effect you or your job or your retirement or your ability to provide for your family? Nah, couldn't happen.

Next step in this parade of fun is to keep yoour eyes open for bankruptcies of big fiancial instituions like Washington Mutual, and others. Countrywide was saved by a government arranged buyout. this will spook the markets even more and as the article in CNBC pointed out it may be too late for the FED to intervene effectively.

Also, watch the foreign markets. Should the Chinese market meltdown, whichmany think is inevitable due to its overvaluation, then we will have end game.

[C&CDean]

You need to change your sig back to the "one big freaking ray of sunshine."

:D

[bluedogok]

Every time that I hear the name Bernanke it makes me think of General Barnaky, Hey!!! He stills owes me money