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Fed’s call for stimulus may be too little, too late
By cpa | January 20, 2008
Markets have entered a panicky freefall, the common precursor to at least a temporary rebound. Mortgages reached 5.75 percent, approaching the 5.25 percent all-time lows of ‘02-’04 from which rates vee’d up every time. Of course rates could go lower, even set a new record, but this is a bird-in-hand moment for refinancing.
This adventure began in August with the onset of The Crunch. Through September the markets were aware of a modest crisis, one of those odd, transient, Fed-bank-plumbing things. Only credit market insiders were worried, staggered by the magnitude of potential loss. By October even the Fed had relaxed. Concern renewed and spread on news of defaults and losses in November and consumer weakness in December, but financial market opinion, especially in stocks, was still cool about the whole thing.
In the last three weeks, painted plainly on stock market charts, everyone has waked to danger, and the hazard itself has grown. Once confined to mortgages and very strange “structured” IOUs, an economic pullback threatens defaults in a wide range of credits, the typical victims of an economic slowdown, hitting a badly impaired system.
After this week’s massive write-downs at Citiand Merrilland elsewhere (about $30 billion), the Wall Street Journal totes the aggregate write-down since August at $107 billion. Some say we are past halfway in the adventure, but credit people laugh bitterly at the suggestion.
New economic data are not as bad as the fear of what will come: December retail sales fell 0.4 percent; inflation numbers were OK, just above the 2 percent “core” bound; new-home construction indicators in December were awful; the Philly Fed’s index went to recession level (a big Thursday mover); and indices of the global economy are sinking. Then a pair of positive surprises: New claims for unemployment insurance are way down, and January consumer confidence rose from the December pit.
Topics: STOCK |