The headlines can really be misleading....
Tuesday morning, bank stocks took off with CitiGroup leading the way with a 25.7% increase. The stimulus is CitiGroup’s news that they have posted operating profits for the first two months of 2009. This does seem to bring a sigh of relief to many until one listens closely to what they are telling you.
Did they so conveniently forget to disclose how much bad debts they had written off in these two months? CitiGroup made $19 billion in January and February but if you recall that since October 2008, they had received two federal bailouts, $45 billion of capital from the Treasury Department's Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets, you have to ask how much can $19 billion fill the deep hole CitiGroup is in.
Judging from market reaction, I am dumbfounded whether people are genuinely that naïve or perhaps they are simply willing to settle for any glimpse of optimism and hope.
In any case, may I remind you that 1929 Depression had such dire consequences that it took the market up to 1954 to recover. Globalism has magnified the effects of gobal economic crisis surpassing standards set by the 1929 Depression. Recovery will be slow. Dead slow. Think about it.
Did they so conveniently forget to disclose how much bad debts they had written off in these two months? CitiGroup made $19 billion in January and February but if you recall that since October 2008, they had received two federal bailouts, $45 billion of capital from the Treasury Department's Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets, you have to ask how much can $19 billion fill the deep hole CitiGroup is in.
Judging from market reaction, I am dumbfounded whether people are genuinely that naïve or perhaps they are simply willing to settle for any glimpse of optimism and hope.
In any case, may I remind you that 1929 Depression had such dire consequences that it took the market up to 1954 to recover. Globalism has magnified the effects of gobal economic crisis surpassing standards set by the 1929 Depression. Recovery will be slow. Dead slow. Think about it.
7 comments:
"Judging from market reaction, I am dumbfounded whether people are genuinely that naïve or perhaps they are simply willing to settle for any glimpse of optimism and hope."
I'm sure it's more of the latter. Besides, after losing more than 90% of their value in stock, a climb of 25% from less than a dollar is...miniscule in comparison. People know that, but they want to hope that there will be an upturn within a year or two. Psychologically, it will take people quite a bit of time to adjust to these new times.
Also, what do you think about the mark-to-market accounting changes they are talking about right now (they will announce changes on Thurs?)
Hmmmm, I am sure you know what benefits mark-to market will bring. But, this point in time, it is impossible to implement because it would mean immediate bankruptcy for many banks and firms.
But I am curious as to what kind of changes they have in mind. Question is which industries they will target first.
That is a very good point. Many banks and firms will not be able to survive the "clean slate" that Obama wants for them. I can see why US would want to save AIG, but what are the ramifications of saving the big Auto companies like GM and Chysler who seem to have a BIG BLACK HOLE of debts and no hope of turning their business around in these times. Why would the US gov still spend stimulus money on these auto firms? And wouldn't it be better to get these auto firms to show exactly how weak their company is with the mark-to-market implement, so that people can see clearly if there is any hope left to save them, instead of throwing money blindly into the sea?
Yes, why are we dumping money on hopeless cause?That is the question that even the US government don't have the answer to. Or does it simply imply that even ordinary people have the common sense that these political leaders simply are handicapped in?
I think people are resistant to change...and governments are even more so. So our governments want to return us to the quality of life we were used to, even if it is not sustainable. And I think people expect that too. So people would expect our governments to save those companies that are important to save because the ramifications from their failure will run so far and deep that our quality of life would be forever changed (or lost). If you were the government, and you realize the shithole that everyone is in, but you have no choice but to govern them, won't you chose the route to make people happy?
No. I would give a speech, lecture them on their stupidity and what they need to understand, condemn politics and then resign because I don't want to be part of this pathetic charade.
Of course, before I finished my speech, I may already be silenced. But me and my conscience will still rest in peace.
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