What the Markets’ are telling Us
The Bear on Jul 17 2008 at 8:30 am | Filed under: Economy
On Tuesday I had a chance to speak with the head of a market research firm for about an hour and I would like to share some on his insight with you.
He asked that he remain anonymous because his firm charges for this service and I must respect those wishes. But I can tell he is a frequent financial analysis contributor on the business TV channels.
He started out by telling me that Washington (Congress) is preoccupied with shifting the blame for our economic woes on anyone they can find, except for themselves, “It is a witch hunt to find someone who they can burn at the stake. They would be happy to burn “Big Oil” or oil speculators as for the root of all our problems when in fact they are the main cause.”
He went on to say that most of the oil speculators are scared to death at this time and are selling short (Meaning they expect oil prices to go down) and they really don’t know themselves which way this market is going to go.
As far as inflation is concerned, which is currently running at about 4.5% he said that if you discounted the cost of energy and food it is running at about 2.5% but “only a fool would not look at the real numbers.” His point being that this spike in inflation can be directly attributed to the cost of oil.
His thoughts on Fannie Mae and Freddie Mac were interesting. First of all, Wall Street does not agree with the Fed’s proposal for a government bailout and the markets will continue to move sideways as they remain insecure. (And here is where it got real interesting) When Fannie and Freddie were created there was a need for a secondary mortgage market, today there is no need for them as we have a private secondary mortgage market in place that could absorb these loans. He went on to say that Fannie and Freddie are gigantic government agencies that are not only not needed at this time, but obsolete and should be disbanded.
(To which I add, once government creates an agency it assumes the mantel of eternal life.)
As far the Presidential Election is concerned he went to say, “Wall Street is not happy with either candidate’s ability to handle the economy. They look at it like a ‘Train Wreck’ about to happen in November and whether the trains falls of the left or the right side of the tracks it doesn’t matter.”
(To which I add, how did we get into this mess?)
Related
Finish the Companies Off
Much of what the Federal Reserve and Treasury said to prop up Fannie Mae and Freddie Mac over the weekend was redundant. For the Treasury to offer them a potentially unlimited line of credit was redundant: Fannie and Freddie already have full possession of the federal credit card, a fact of which their creditors (including Asian and Middle Eastern central banks) and politicians never were in doubt.
Opening up the Fed’s discount window was likewise redundant—at least up until the point where Uncle Sam’s own credit is shot and the Fed starts printing money to make good on its commitments. We’re not there yet—but that’s where all this may be heading: to the Federal Reserve “monetizing” all kinds of bad public and private debt, from mortgages to student loans to the unfunded liabilities of Social Security and Medicare.
[...]
With Fannie and Freddie on the ropes politically, let’s put them on a path to privatization and liquidation.
SideBear: Don’t you wish you where just like the Fed? Running short on money, just go down to the basement and print more.
Read more from The Wall Street Journal
Fannie, Freddie spent $200M to buy influence
If you want to know how Fannie Mae and Freddie Mac have survived scandal and crisis, consider this: Over the past decade, they have spent nearly $200 million on lobbying and campaign contributions.
But the political tentacles of the mortgage giants extend far beyond their checkbooks.
The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home.
They’ve stacked their payrolls with top Washington power brokers of all political stripes, including Republican John McCain’s presidential campaign manager, Rick Davis; Democrat Barack Obama’s original vice presidential vetter, Jim Johnson; and scores of others now working for the two rivals for the White House.
Fannie and Freddie’s aggressive political maneuvering has helped stave off increased regulation and preserve special benefits such as exemption from state and local income taxes and the ability to borrow at low rates.
When their stock prices took a dive last week, their government allies extended another helping hand with a plan for the Treasury Department, the Federal Reserve and, possibly, Congress to shore up the companies.
SideBear: THIS goes far BEYOND politics as usual, it is criminal! We all should demand an independent citizens’ panel to investigate what is obvious collusion and corruption in Washington. You can not have the thieves investigate themselves!
We have to stop these greedy SOB’s before they bankrupt the country!
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