Walk on Eggshells
“Every breath you take, every move you make, every bond you break, every step you take, I’ll be watching you….”
Ironic, isn’t it? We want the Federal government’s moves, measures, and initiatives to work somehow to stem the negative vibe, and calm the tide of fear consuming the world of equities trading. But every time the duo of Ben Bernanke and Henry Paulson steps into action, it’s as if their action alone adds gravity to the next leg of transactions.
Life in a fish bowl
Their interventions are extraordinary, so it figures that what must have gone wrong is equally if not even more extrordinary. Anticipation is the sentiment of the moment; watching overseas markets gobble up some little bit of the ground they lost in the previous two week now becomes a practically unavoidable blood sport. The futures point upward. People so want to rock & roll.
Here’s some Monday a.m. toplines, primarily if you’ve spent the weekend living under a rock.
- Existing shareholders in banks stand a better chance of seeing their equity investments protected as the U.S. Treasury directly injects capital into financial institutions.
Treasury’s program would be voluntary and aimed at healthy banks, not failing institutions. While details are still being worked out, most banks likely would be able to participate in the program, though seriously troubled banks already close to failing might not be allowed to partake. The government would be a passive investor, using funds granted as part of the $700 billion bailout package. The program could be up and running shortly, according to people familiar with the matter.
- The limits come off as the Fed begins to provide unlimited funding via swap facilities with three European central banks, per the Wall Street Journal. We’ll see if that measure eases financial strains as the banks will be able to draw as many dollars from the Fed as they need.
- The G7 leaders decided, finally, that the moment had arrived for concerted, collaborative, and cooperative approaches to stabilize reeling economies. Now the world holds its breath to see what that decision adds up to, and whether it can do anything to thaw credit markets and stir sentiment in a positive direction as opposed to its recent free-fall. CNBC offers its take with a global lens on how the respective economies connect and rely on each other.
Closer to home, eyes in the home building segment will look, but not be surprised on Thursday, as the National Association of Home Builders releases its monthly housing market index, which contains a measure of home builder sentiment and expectations. The NAHB, you’ll remember, anticipated that the Housing Rescue bill, signed off on in July, eliminating seller down payment assistance on October 1, and introducing a $7,500 home buyer government, would do the job of kick starting the market as soon as people got the swing of it. Hasn’t happened.
Now the NAHB has joined the chorus that a more significant and genuine home buyer credit, of say $15,000, would be what it takes to prime the pump of demand in the market.
That ranks as one of the too-little-too-late gestures that leave so many of us thinking, “why can’t they get ahead of the curve” on at least one part of this host of challenges?
Also coming this week will be U.S. Census Bureau data on housing starts. One can only hope that they’re as close to flatline as possible, so that people start getting the notion that home builders are “overshooting” suppression of supply in order to eventually restore the sense of scarcity to the market at some point.
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