Its Raining Outside

The fall is officially here in Cambridge and the darkness outside is mirroring the hammering that the stock market is taking today. The financials are getting pummelled in the wake of continuing write-offs and the recognition that people like me are not just doomsdayers for no good reason. In addition, if the stock price is any indication it looks like people are predicting the worst for IMB (one of the largest remaining mortgage brokers) – for what it’s worth, I think the jury is still out on this one.

It is not just me who thinks that the bailout agreed to earlier this week is a bad idea. Apparently Mr. Greenspan thinks that this is significantly different from the LTCM bail out and that what it amounts to is an attempt at creating liquidity in a market where it doesn’t exist. I see it as creating a false “bid” where there are no buyers, but this could be the same thing – i.e. making a “market-maker” where noone wants to be caught holding the hot potato.

And for good reason. Apparently one of the “SIV’s” that the fund is supposed to bail out is now in default. This one has only about $6b worth of assets, but I could imagine it is the first of many that are on the brink: Cheyne Finance SIV Defaults on Commercial Paper

Here is the article discussing Greenspan’s critique: Greenspan criticises ‘superfund’

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