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Overnight Open Thread

254
3 wood2/03/2009 4:26:32 am PST

re: #241 Jim in Virginia

3wood, what was going on yesterday? Basic fear and uncertainty? The Dow jones roller coastered back and forth over a fairly small range. No big rallies, no big drops.

Swing trading.

You have hundreds of billions of dollars just sitting on the sidelines, waiting for the market to settle down. At the same time you have short sellers pounding away, while others are buying up bargains.

The Obama “stimulus” pork package is dead and everyone knows it, so many are now speculating what the next version will hold.

But the biggest concern is settling down the banking situation. The realization is slowly spreading that these Obama administration guys are not all that bright either.

The single biggest thing that could be done to improve the banking situation is stop the mark to market valuation. Think about it, if you were a bank, would you make a loan that you then might immediately have to take a write down on cause of circumstances outside your or the borrowers control? Even if the loan is being paid back on time you still would have to take a write down. Of course you would not.

So you would just sit there hoarding your cash and waiting for the things to change. But all the while the lack of lending causes the real estate prices to drop even further, and the economy to slow down even more.

That is what is going on.