"Another portfolio manager made an interesting point about the manner in which large portfolios have chosen to operate recently. He suggests that many funds have moved to private equity funds from public stock. He also notes that many had retreated from individual stocks and bonds for the glitz of hedge fund returns.The problem there is that the new technique of management parks money in a place from which it is not extracted with ease, speed and dexterity. So the only stuff that is not nailed down and available for sale is Treasury and mortgage paper."In this market climate, I recommend reading this guy's (John Jansen) stuff ☛ http://acrossthecurve.com/ (keep in mind I'm a technologist and someone that has been away from "the Street" for almost 20 years....)
"The move to back all U.S. bank deposits, which is only in the discussion stage, would be aimed at preventing a further exodus of cash from financial institutions, including small and regional banks, some of which are buckling under the strain of nervous customers. In recent weeks, customers have pulled money out of some healthy community banks under the assumption that the government will only insure all the depositors of larger banks in the event of a failure.
To remove the ceiling on deposit insurance, multiple government agencies would first need to agree that there was a "systemic risk" to the economy, thereby invoking a rarely used legal power. Amid repeated efforts by the federal government to prop up ailing institutions, some bank regulators say the move is justified".
"One major flaw in the global banking system, and a sign that problems extend beyond whether U.S. homeowners can pay their mortgages, is the fact that banks don't trust each other enough to loan beyond an overnight period. That means that cash isn't being circulated through the financial system and banks are relying too heavily on short-term loans, which does little to help pay off looming debts. Banks are hoarding cash, both to cover their debts and to improve their year-end books."
"I have said this before and risk redundancy but more and more it seems likely that the resolution of this crisis will be an historic financial calamity. Each and every step which central banks and regulators have taken to resolve the crisis has been met with failure. In the beginning, the steps would produce some brief stability. In the last several days, the US Congress (belatedly) passed a bailout bill, the Federal Reserve has guaranteed commercial paper and in unprecedented coordination central banks around the globe slash base lending rates. Listen to the markets respond.The market scoffs as Libor rises, stocks plummet and IBM is forced to pay usurious rates to borrow. There is no stability and no hiatus from the pain. It continues unabated in spite of the best efforts of dedicated people to solve it. We are in the midst of an unfolding debacle. It is happening about us. I am not sure how or when it ends, but the end, when it arrives, will radically alter the way we live for a long time."
"The Dow has plunged nearly 15% during its losing streak so far, and is down 35% from its record finish a year ago.
Peter Cardillo, chief market economist at Avalon Partners, said the 9000 level, could prove to be an important testing ground for whether the broader crisis of confidence has run its course. If the market holds there, as Mr. Cardillo expects it might, the market could begin to build a more sustained rally. But if it breaks through that round number by a significant amount, the bloodletting could continue for days longer, at least.'It's getting to a point where it's every man for himself,' said Mr. Cardillo. 'When fear reaches that level, you're getting close to a bottom. But we're clearly not there quite yet.'"..."Psychology is not allowing what the economics textbook says should happen to actually happen," said strategist Doug Peta, of the New York portfolio-management firm J. & W. Seligman & Co."
"The world's central banks launched a large coordinated attack against the widening global financial crisis, lowering short-term interest rates in unison.
Separately, the U.S. Treasury Department is considering ways to inject capital directly into banks, possibly by taking equity stakes. Treasury Secretary Henry Paulson, in a marked shift in rhetoric, played up Treasury's newfound authority to "inject capital into financial institutions."
..."The moves likely mark just the beginning of broadened government efforts to keep the world-wide credit freeze from strangling the global economy. 'For all central banks, this is not the end of the story,' says Laurence Meyer, vice chairman of Macroeconomic Advisers, a forecasting firm, and a former Federal Reserve governor. 'We're facing a potentially severe recession.'"
"Despite the declines, traders described the selloff as remarkably orderly and largely free of panicky jettisoning of big positions. Many say that in recent days, the market has been under pressure from small investors who are throwing in the towel after getting quarterly brokerage and mutual-fund statements showing big declines."...The stock market is acting as if investors wanted the rescue "plans instituted a month ago," said Michael O'Rourke, chief market strategist at brokerage firm BTIG LLC. "The things driving sellers are worries -- not an analysis of where these programs will take us in the next three to six months."...One problem dogging the stock market is that so-called value investors to a certain degree have been taken out of the game. Many of the biggest and best-known value investors wrongly bet as far back as late last year that stocks had fallen too far -- especially financials -- and bought shares. These fund managers are now facing withdrawals by angry investors who are suffering big losses."
"'With financial markets worldwide facing growing turmoil, internationally coherent and decisive policy measures will be required to restore confidence in the global financial system,' the IMF said in the report. 'Failure to do so could usher in a period in which the ongoing deleveraging process becomes increasingly disorderly and costly for the real economy.'"
"Earlier this year, nervous investors were phoning advisers with 30 or 40 years' experience, looking for their perspectives on the financial crisis. Now, investors are looking for people with longer experience. Mr. Glickenhaus got his training as a municipal bond trader at Salomon Brothers & Hutzler (now part of Citigroup) after studying economics and graduating from Harvard in 1934.
Although Mr. Glickenhaus thinks stocks have fallen so far that a short-term rebound is likely, the economy is so weak and the financial system so damaged that a "recession or even possible depression will last for at least five years," he warned. "Eventually, we could get to 9500 easily on the Dow" Jones Industrial Average, a decline of about 8% from Friday's finish of 10325.38."
"You can’t magically fix confidence. Period. There is no shopping our way out of this mess. There will have to be great leadership, great decisions and some behavioral changes. The ‘brain’ that is the market is pretty pessimistic about that occurring any time soon."
"A slew of new data suggests the credit crisis is deepening as lenders grow increasingly distrustful of their own customers and each other....
The most worrying aspect of the crisis is a growing reluctance among financial institutions to offer basic loans that are the lifeblood of the economic system. The Federal Reserve said Thursday the situation had worsened over the past week. Its data showed lenders reduced short-term loans to companies by a record $94.9 billion, bringing the total decline to $208 billion over the past four weeks."