Monday, September 29, 2008

If we are heading into a three year recession followed by a period of inflation, the DJIA will try to find its way to around nine or ten thousand. So today's move would have happened over the next few weeks, even if the bailout legislation had passed overwhelmingly -- and if the bailout passes on wednesday or thursday, then the Dow will probably go up by a few hundred, but won't get back the full move.

Why expect banks to increase their lines of credit to overstretched consumers, when the two main sources of consumer wealth -- real estate and stocks -- are down twenty and thirty per cent? Even if the banks are recapitalized by the bailout, they may well decide that it makes more sense to focus on customers in developing and expanding economies rather than mature and contracting ones.


Post a Comment

Links to this post:

Create a Link

<< Home