Here’s a bit of thought from one part of the buyside out of Mesirow in Chicago seeming to confirm equity markets surge this morning. These developments also come out of G-7 related mtgs at World Bank and IMF over this past weekend in Washington , as well as follow on to matching Ireland ’s guarantee of all Irish Bank Deposits. I’m glad to see though that the Irish can make an independent judgement without having to wait for the entire EU to act. If they wait for the EU Commission all the time, nothing would have ever get accomplished.
Marc E. Morlock
Sunday, Oct. 12, 2008 – 8:38 p.m.SOLUTIONS ARE NOW GLOBAL. European leaders have been meeting all weekend to provide a rumored 100% insurance on deposits to stop any potential arbitrage that may occur across countries within the Euro Zone, as investors seek the safest harbors they can find. They have also agreed, in principle, to infuse the European banking system with capital to guarantee inter-bank lending. They hope to prevent a repeat of Lehman’s collapse in Europe , and the collateral damage that it caused.The pressure will be on the Fed, the FDIC, and, more specifically, the Treasury, to follow suit and insure 100% of bank deposits. I expect that to occur within the next 24 hours. Initial reactions to the global intervention by foreign countries are positive. However, we still have to survive profit announcements in the U.S. this week. Profits will generally be weak, but suggest much higher stock prices than we currently are seeing. The fly in the ointment is earning “guidance,” where firms try to give an assessment of the future, which is virtually impossible at this stage of the game.
The moral of the story: I have never seen such an extraordinary buying opportunity, but technical factors could continue to place a drag on this market for the next several weeks. I can’t call a bottom, especially in an economy that is certain to get worse before it gets better.
The only upside risk is oil prices, which have now fallen enough for consumers to at least keep food on their tables this winter. Indeed, a drop in energy prices could be the biggest offset we see to temper the declines in spending in the fourth quarter.
