Yesterday appeared to be an “in your face” day as the markets responded with another sharp drop to the downside in response to the Fed/US Treasury announcement of a $85 billion loan to one of the living dead, namely AIG.
I think Wall Street is finally seeing beyond the futile government attempts to prop up failing companies in order to postpone the inevitable pain; instead of facing the facts and letting the free market sort things out on their own.
Recently I read in an interview with Satyajit Das, one of the foremost experts on derivatives, whose book I reviewed back in July.
He was asked to describe in baseball terms as to whether we would be in the 5th or 6th inning in terms of the anticipated end of the credit crisis. He laughed and answered: “You are still singing the national anthem.”
I am certainly not qualified to argue that with him, but I believe that the bear market we are in has the potential to make the 2000 – 2002 period look like a pimple on a gnat’s butt. And there is nothing anybody can do to stop it as much as government officials are trying to convince you otherwise.
The free market has to run its course, but I am sure about one thing. Once the dust settles, there will be tremendous investment opportunities ahead for those who survive the bear with most of their assets in tact.