Intervention Ain’t What It Used to Be

Today’s recommended MSM article is via the Ahead of the Tape column in the WSJ, titled "Intervention Ain’t What It Used to Be."

"Government intervention is losing its market mojo.

The one-day stock rally sparked by the rescue of Fannie Mae and Freddie Mac was quickly erased Tuesday, drowned out by fresh worries about Lehman Brothers Holdings.

Repeatedly this year the government threw out a safety net as the stock market teetered at the edge. Think of the three-quarter-point emergency rate cut by the Federal Reserve in January, the shotgun wedding of Bear Stearns to J.P. Morgan Chase in March, and the Treasury Department’s announcement of plans to help Fannie and Freddie, along with the government’s temporary war against short sellers, both in July.

Each action boosted optimism on Wall Street. Grownups seemed to have the situation in hand. Past crises, such as the Long-Term Capital Management bailout, have encouraged a belief that by the time government gets involved, the worst is over.

Not this year. Each bout of hope has been stunted by a realization that worse was still to come. This weekend’s effort had an even shorter shelf life than the others. Despite Monday’s rally, Treasury bond prices rose and some riskier credit spreads widened. The VIX, a closely watched measure of market fear, jumped 12.5% on Tuesday to its highest point since mid-July."

Good stuff . . .

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Previously:
Weekend Bailouts and Subsequent Market Reactions  September 08, 2008   
http://bigpicture.typepad.com/comments/2008/09/weekend-bailout.html

Source:
Intervention Ain’t What It Used to Be
MARK GONGLOFF
WSJ, September 10, 2008
http://online.wsj.com/article/SB122100183460716949.html

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What's been said:

Discussions found on the web:
  1. columbia commented on Sep 10

    Barry, any new thoughts on Lehman? Are the PFD’s or debt a potential buy?

  2. BG commented on Sep 10

    IMHO what makes this one different is the sheer scale of the problem. Again IMO, the only way you can say this problem is ‘contained’ is if the entire global financial system is under the protective blanket.

    The malaise has drifted over every part of the world. Plus, I get a sense that the rest of the world is thinking (but not saying at least not publicly) that this mess was brought on by the US and it is our problem to clean up while the rest of the world sits on its hands. The problem is global but the attempted solutions center on the US. (We ain’t getting any help.)

    The problem is systemic, its tenacles are not unlike a metastasized cancer that everyone knows is flowing thru the financial system; but, no one knows where the evidence of the cancer will manifest itself next, so we wait.

    The whole thing apparently is so complex, it is not calculable at the ground level; but can only be approximated with little specificity. I have also noticed when interviewing some of these so-called financial experts, they are losing their confidence in what’s ultimately going to happen and what needs to be done now.

    As this thing continues, we are going to see more and more people as they are proven wrong (like Vince Farrell) to just give it up and say guess what… “I don’t know!” That is the death nail for anybody who is supposed to be in the know; but, we are going to start hearing that more and more from people unwilling to risk damaging their credibility any further.

  3. Rob P commented on Sep 10

    BG: Exactly right, the sooner everyone admits they aren’t in the know and have no clue the faster we can go down to reasonable values and start recovering. The water torture crap the fed is forcing down our throats is painful. They are just trying to slow it down so there isn’t a major shock which I can understand but damn there has to be a limit!

  4. Concerned Citizen commented on Sep 10

    Anyone check-out the Buffet/Welsh first-pitch? Why wasn’t there more people in the stands? Bosox not doing too hot this year?

  5. VoiceFromTheWilderness commented on Sep 10

    Well, I guess the Wall Street Journal isn’t confused as to the intended beneficiary of Paulsen’s actions.

  6. leftback commented on Sep 10

    The next bloody rate cut or “lending facility” is waiting in the wings, I am afraid…

    Barry will have the following engraved on his tombstone:

    “FREE MARKETS, MY ARSE”

  7. Concerned Citizen commented on Sep 10

    Dillon and goof-ball Bob Insanti are trying to talk the market up by saying how the drop in fuel prices has helped FDX’s bottom-line. What they fail to point out is that there are fewer and fewer packages being sent.

  8. karen commented on Sep 10

    Leftback, thot you’d appreciate the financial ninja’s comment this morning:

    Forget about inflation. There has never been in the history of the world an inflationary run while land prices were declining. The amount of debt being destroyed as the monster of a debt bubbles implodes will suck down all asset prices and just absolutely collapse the velocity of money.

  9. Rob P commented on Sep 10

    Ok what’s up right now in the market? I don’t follow the market as close as some of you do, but it is getting too quite out there! I’m getting an uneasy feeling. Anyone else sharing this anxiety besides me?

  10. HCF commented on Sep 10

    > Intervention Ain’t What It Used to Be

    An addict always needs more and more just to get the same fix as before… Our system clearly needs some detox, lest it overdose on monetary and fiscal stimulus.

    I don’t want America to become the crack-whore of the world. We’re on our knees and will do humiliating things for $5 Trillion (or even $5 billion) apparently…

  11. BG commented on Sep 10

    Concerned Citizen,

    As strange as it seems at the moment, the day is coming when we will see a huge rally in the markets because commodity prices went UP. I kid you not. To me, it is unmistakable. We are in the early stages of a worldwide slow down. Even oil with a few bulliest fundamentals going for it today are not changing the direction in the price of oil. It is STILL going down. IMO, it has a long way to go. I am thinking $60s.

    The financial chatter and confusion in nearly every discussion is continuing to increase. I’m not convinced the Feds and the PPT are going to be able to keep this decline under control. We are on the precipice.

    Commodity prices have an element of fear built into them. The lower they go implies their demand all over the world is continuing to go down. Remember every trade takes two parties. I am afraid everyone is running to the same side of the ship. Oil going down today of all days tells me that.

    Lastly, if commodities continue down, that brings on a whole different set of problems for other financial players under distress.

  12. lunatic_fringe commented on Sep 10

    I think intervention will still work, it’s just that this intervention was poorly timed. On all the previous attempts to jump start the market we were severely oversold. This time that wasn’t the case.

  13. Scott in Chicago commented on Sep 10

    Intervention ain’t what it used to be because America ain’t what it used to be. We are hollowed out; economically gutted.

    More important: How does Barry find the time to blog when he spends so much of it coming up with a new string of secret access code every time one of us feels compelled to post? ;)

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