Yesterday US Treasury Secretary Henry Paulson stated US government will provide bail-out $700 billion to financial institutions to help consumer credit market. US government has already pumped $250 billion money to a total of 52 banks which might be higher.
It is difficult for US government to determine the price of the illiquid mortgage assets to bailout which everybody was having trouble in valuing.
So US government choose avoid to involve more in the process of mortgage market bailout and shift to the financial institutions by piling the consumer credit directly.
Whether it is a wise way to pump money like this way or not, stock market investors won’t appreciate US government cheap credit in the money markets. Economist like US Treasury Secretary Henry Paulson is quite clear the money market is out of the value.
It is easy to predict the depreciating currency, increasing CPI (consumer price index). In the stock market, it can be tough; it is hard to predict what stock will worth to buy and how much will the stock holdings worth tomorrow. Government regulation and monetary policy can change from day to day. One stock can worth nothing or be bailed out.
Cutbacks and non-profitability are already bad enough to avoid stocks for now.
I agree with this too. The stock markets are nothing compared to the Foreign Exchange market (Forex) where a person can trade international currencies. Stock markets can crash and are quite small compared to the Forex market which is the largest market in the world. I especially would not put any faith in the U.S. stock market considering the fast decline of the American economy. They can do bailout after bailout and it will only postpone the inevitable. I do not know how America can pay back more than 10 trillion too. So it’s better stay away from stocks.
Comment by Martin Eshleman — February 9, 2009 @ 3:23 pm