Week in Review
by Tom on March 22, 2008
in Uncategorized
Well, it’s another week and what’s been transpiring? Where to start…..
Sunday evening – normally things that happen in the financial markets don’t happen on Sundays but Sunday evening it was announced that JPMorgan Chase bought Bear Stearns for $2 per share. That’s $148 a share less than what they were trading for 2 weeks ago! Oh, and the Federal Reserve guaranteed $30,000,000,000 worth of Bear Stearns liabilities. What does that mean? My take on it is that if Bear loses money (let’s say a paltry $15 billion), the Fed (aka you and me!) pay for it. Ouch.
Monday the markets spent the day, frankly, digesting the stunning news that Bear Stearns went from being valuable to essentially worthless.
Tuesday – the Fed lowered rates by .75%. To put it in a little bit of perspective, the Fed has lowered rates by .75% three times since 1990. They did it in January of this year, this past Tuesday, and on November 15, 1994. Now I want to step back and examine things a little. To me, if I look at those facts, I’d say, “Wow, we must be in a world of hurt if the Fed feels that they need to slash rates by 1.5% in the last 60 days.” But what does that market say? “Yippee! Uncle Ben is here to save the world, everything is good, let’s have a party!” And the Dow went up 420 points!
Wednesday – the markets had, shall we say a bit of a “hangover” and seemed to wake up and realize that what Uncle Ben and his printing press were doing weren’t going to solve the problems in the financial world and we lost almost all of what was gained on Tuesday. A 700 point swing in 36 hours……
Now we get to Friday and the good thing about the markets on Friday is that……… They are closed! So, no major news going on today.
Scattered throughout the week were a number of economic reports, earnings reports, and other statistics. It would take quite some time to outline all of them, but let’s just say that the overall tone of the reports was that some weren’t as bad as they could be, but none of them were actually good news.
So, where does that leave us at the end of the week? Well, a couple of thoughts:
1. Rates are better than they were at the end of last week, but the volatility in the markets is still unbelievably high.
2. The markets are all kind of looking around waiting for another shoe to drop. Who’s the next one that’s going to, shall we say, “Do a Bear Stearns” on us?
3. We haven’t seen nearly as many program changes this week as last week.
4. I’ve been keeping track and I’ve talked to at least 7 people this week who wanted to refinance and very well might not be able to because they owe more on their house that what it would most likely appraise out at. That’s not a fun thing to tell people.
I’ll continue to keep you informed, stay tuned as we continue this wild ride!
Have a great Easter weekend and in spite of all of the trouble in the financial worlds, focus on the really important things in life this weekend.
