We’re Saved….? (Updated).

Congress has passed the $700 billion dollar rescue plan to rescue Wall Street, however investor sentiment remains poor. US stocks fell heavily after the plan was passed.

According to John Ogg, a analyst at financial website 24/7 Wall Street “The economy was toast without this package” he said .

“But the economy is still likely going to suffer and enter into a recession … This bill may not be enough and it may already be too late.”

Government data showed today the struggling US economy lost 159,000 jobs in September as the weight of the housing collapse and credit crunch hit a broad swath of industries.

Not sure about you, but I believe that we’re heading for rough times. The company I work for has already decided that it won’t be replacing staff that resign (through normal attrition) and some redundancies may be necessary if conditions don’t improve.

Recent reports indicate that the Real Estate market remains stagnant with house prices falling in most Australian States.

How do you feel..?

UPDATE:

Oct 6: The Australian share market has fallen to its lowest level since 2005.  The dollar has also slumped to its weakest against the US dollar in two years.

In early afternoon trade, the benchmark S&P/ASX 200 index was down as much as 168.3 points, or 3.6%, to 4527.1.  The slide took the index below the 4,600-point level touched during last month’s market panic after the failure of US investment bank, Lehman Brothers.

Shares continue to be buffetted by worries about the weak US economy, the efficacy of the $US700 billion ($900 billion) financial markets rescue plan, and concern about how the spreading crisis will hurt Australian companies, said James Drohan, private client adviser at Ord Minnett.

“The bail-out will probably work but it won’t be a quick fix,” Mr Drohan said. The package has improved the sentiment for some investors but there remains some doubt about how effective it will ultimately be in resolving the banking crisis, he said.

On top of the US Government’s action last week, worse-than-expected job losses weighed on the US market and discouraged local share investors.

“What we are left this quarter and maybe next is a US economy to all intents (finally) in a recession as evidenced by manufacturing, retail sales and now labour market measures.”

Full story here

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30 Responses

  1. By saved do you really mean “rooted”???

    My only concern is that the company I work for is a very large US multinational (manufacturing) & I doubt that they are immune to this “crisis” .
    Best job I’ve ever had so I certainly hope that the ship stays steady. Hard to gauge & I don’t reckon that they’d let on until the pink slips were prewritten.
    Should give ’em the benefit of the doubt though as they’ve been exemplary employers thus far & we have 100% Union saturation.
    Things in the US seem to be getting just about beyond control now so many, through no fault of their own, will pay for the excesses of a few.

  2. reb,

    I work for an international insurance company, and I am not feeling too optimistic about the renewal of my contract at the end of the year. But the upside is that it is one of the few financial institutions that has not suffered a big fall in it’s share price, so their liquidity is fine.

    But still – it is a worry about what is going to happen.

  3. HD:

    “I don’t reckon that they’d let on until the pink slips were prewritten.”

    Ain’t that the truth, and the final despicable act of corporate management. Probably based on advice from Human Resources.

    “Best not upset the cattle before we slaughter them. Keep them productive to the bitter end”

    I have nothing but utter contempt for “Human Resources”.

    The first and major thing that really shits me is that that people are “humans” not fricken “resources”.

    Until such time as they start to actually treat people as humans, I reckon HR execs should be severly tortured with electric probes and cattle prods..

    Tell me once again that “people are our most important asset”

    ZAP!!

    Tell me once again that “we encourage people to take risks”

    ZAP!!!

    Tell me once again that “we encourage people to reach their potential”

    ZAP!!!

    I could go on, but I suspect you get the point…

  4. Fairly sure we’d all agree George W’s presidency has not been a good one. Marred by poor decisions, and now this disaster as a parting shot.

    The way I see it is that this is his last and only chance to redeem himself (to a degree). If this bail-out averts global economic meltdown, he will leave with some dignity restored.

    Not altogether confident though. Capitalism seems to produce an inevitable cyclic effect: boom and bust, and there might be little that can be done to smooth that out, no matter how much money is thrown at it.

    Still, it pays to be optimistic. As a wise man once said, “Prepare for the worst; hope for the best.”

  5. Clarke and Dawe explain the US Credit Crisis:

    That makes it all perfectly clear!

  6. reb…. they explained it a lot better than the real economists did.

  7. You know that the most important query I have is the shape of the future fund in this turmoil.

    When I learnt that the money went off shore and near half was invested in ‘high risk’ ventures my heart sank…if my fears are correct then Workchoices will pale into insignificance.

  8. I was looking at the impact of the economic crisis and bail out situation in the “other” part of the world ie not depedent solely on the US economy and this piece showed me again why I admire the Indian Prime Minister.

    http://timesofindia.indiatimes.com/Business/Intl_Business/Crisis_may_not_hit_India_hard/articleshow/3551061.cms

    In fact, Singh saw the dire developments as validating his cautious approach towards opening up of the financial sector. “We have been cautious reformers, reforms with a human face. So right from the beginning, when we opened up our financial markets in 1993, we went step by step. We still don’t have full blown capital convertibility, so whatever we have done, has been done with the long-term interest of the country in mind and at the same time, we have sought to ensure that the risk in the process of opening up are controlled.”

    Something the tag team of Howard and Costello should have done for us Aussies…..

  9. stuntreb,

    Can’t tell you how much I’ve hated the phrase ‘human resources’ for so long. Used to make me feel no more important than the office typewriter (yes, that’s how long I’ve carried this hate).

  10. “Best not upset the cattle before we slaughter them. Keep them productive to the bitter end”reb

    Having been on the receiving end of “restructuring” on several occasions, in several different companies, it would be fair to say that I’m an ultracynical sack of shit when it comes to such things.
    What’s always annoyed me the most is that whether you are a conscientious worker (as I consider myself to be) or the laziest liability to earn a wage you are all simply treated as maneuvreable cogs to be used or cast aside when the chips are down.
    It doesn’t inspire loyalty to your employer.

    Agree with you & sans about HR too. Man have I had some irate arguments with certain HR managers over the years; always when they tried subtle shit like taking away public hols, adjusting starting times to (conveniently lower your pay by $100pw) give you a “better family life” (fairly debatable if starting at 9:00pm improves your life any more than starting at 7:30pm…it certainly stripped away your higher penalty rates though) & so on & so on.
    I profoundly object to being viewed as a “resource”, such characterisations lead to the sort of dehumanisation that makes it easy to discard people in favour of profit without any pangs of conscience.
    It’s just business they say.

  11. Another term I despise that is used quite frequently these days to describe a certain demographic is the term “empty nesters”

    It suggests that the sole function and purpose of one’s life is to produce offspring. And then, once you’ve fulfilled that obligation you’re considered “empty” – subtley suggesting “barren” – something to be discarded, because you have now fulfilled your potential.

    Whenever I hear it used I always make a point to voice my opinion that I detest the term (for those reasons), as I think it’s actually quite offensive, not just to people who might be of that age group, but not produced offspring, but also to those people that have, as it suggests that they are now basically worthless.

  12. Maybe I’ve lost my marbles but why is it that the two greatest financial disasters, the 1929 crash and our current crisis, have the Republicans front and centre.

    The similarities are between Galbraith’s observations of the 1929 Crash and the current crisis seem eerily familiar. Take this passage that I’ve placed at the end of a series of observations by Galbraith:

    “Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops.”

    ____________________________________________________________________

    “Governments were either bemused as were the speculators or they deemed it unwise to be sane at a time when sanity exposed one to ridicule, condemnation for spoiling the game, or the threat of severe political retribution.”

    “In the autumn of 1929 the mightiest of Americans were, for a brief time, revealed as human beings. Like most humans, most of the time, they did some very foolish things. On the while, the greater the earlier reputation for omniscience, the more serene the previous idiocy, the greater the foolishness now exposed. Things that in other times were concealed in a heavy facade of dignity now stood exposed, for the panic suddenly, almost obscenely, snatched this facade away. We are seldom vouchsafed a glance behind this barrier; in our society the counterpart of the Kremlin walls is the thickly stuffed shirt. The social historian must always be alert to his opportunities, and there have been few like 1929.”

    “The machinery by which Wall Street separates the opportunity to speculate from the unwanted returns and burdens of ownership is ingenious, precise and almost beautiful. Banks supply funds to brokers, brokers to customers, and the collateral goes back to banks in a smooth and all but automatic flow. Margins – the cash which the speculator must supply in addition to the securities to protect the loan and which he must augment if the value of the collateral securities should fall ans so lower the protection they provide – are effortlessly calculated and watched. The interest rate moves quickly and easily to keep the supply of funds adjusted to the demand. Wall Street, however, has never been able to express its pride in these arrangements. They are admirable and even wonderful only in relation to the purpose they serve. The purpose it so accommodate the speculator and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and call for reform

    “Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in Februrary and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But is has long since been forgotten that for many months those who resisted reassurance were similarly, if less permantently discredited. To that the Times, when the real crash came, reported the event with jubilation would be an exaggeration. Nevertheless, it coverted it with an unmistakable absence of sorrow.”

    A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a recoreded 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruiness fall. Even the man who waited out all of October and all of November, who saw the volumne of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenonmemon. The ruthlessness of its liquidation was, in its own way, equally remarkable.”

    “In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. there is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s business and banks. This inventory – it should be called the bezzle. It also varies in size with the business cycle

    Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement “about business conditions, the market immediately drops.”

  13. Congratulations John! Officially the longest post on Blogocrats since its inception!

  14. I like the term ‘working families’…reminds me of scaper out on site, Mrs scaper working in the solicitor’s office and scapette slogging it out in the coal mines.

  15. Scaper,

    I like the term “independantly wealthy” but somehow I think I’ll never have a need to use it…

  16. Interesting though surely reb. It’s the Republican’s love of free markets dating back to Reagan in the 1980’s, on this occasion, that’s led to this mess. It’s a shame Clinton helped fuel it but it was Reagan’s admiration for deregulation and the ‘magic of the marketplace that started the ball rolling.

    I’m waiting for a conspiracy theory to raise its head.

  17. Already started John Mac, it’s all the fault of the Democrats who deliberately scuppered deregulation legislation so the markets would collapse.

    There is now a whole movement gaining ground and getting lots of media space that is saying the fault isn’t lack of regulation but too much and what there is is too restrictive. Just totally deregulate finance and give us a another trillion or so and in a decade we will pay that back many fold and lead you into a golden age the likes of which hasn’t ever been experienced.

    You’d laugh really hard if this line wasn’t getting so much serious contemplation and positive press. So much so, along with the fact it’s McCain’s pov and he has a chance of being elected, that hard laughing quickly turns into crying and then bawling just at the though of it.

  18. Adrian

    Insane! insane! insane! God help us all if that happens.

    It’ll quickly be bomb, bomb, bomb Iran and the shit will really hit the fan. It’ll be all about the control of oil in the Mid-East.

  19. Blogocrats, I’m wondering what you can make of this article? What will be the consequences if it is indeed true and McCain ends up in the White House?

    http://money.cnn.com/2008/09/15/news/economy/500dollaroil_okeefe.fortune/index.htm

    Here comes $500 oil

    (Fortune Magazine) — Matt Simmons is as perplexed as anyone that it has fallen to him to take on OPEC, Exxon, the Saudis, and all the other misguided defenders of conventional wisdom in the oil patch. Why should one investment banker with a penchant for research be required to point out what he regards as the obvious – that from here on out, oil supplies can’t meet demand, and if we don’t act soon to solve this crisis, World War III could be looming?

    Why should a man who scorns most environmentalists have to argue that locally grown produce and wind power are the way of the future? Why should a lifelong Republican need to be the one to point out that his party’s new mantra – “Drill, baby, drill!” – won’t really fix anything and that his party’s presidential candidate is clueless about energy? That the spike in oil prices earlier this year wasn’t a temporary market anomaly and the recent retreat in prices is just a misleading calm before a calamitous storm? That we’re headed toward $500-a-barrel oil?

    “I find it ironic that here we have the biggest industry on earth, and I’m one of the few people to figure out that we have a major problem,” he says, in his confident if not quite brash way. “And I did it all in my spare time. How stupid and tragic is that? I shouldn’t be one of the only folks that actually has a handful of ideas of how we can keep from blowing each other up and get through this.”

    Simmons was transformed overnight from an influential industry expert to an A-list pundit by the publication in 2005 of his book “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy,” a fairly technical read which argues that Saudi Arabia’s oil supplies are much more limited than everyone thinks.

  20. Don’t knock it. Nothing like a good ole war to get the economy moving again, goddurn it!

  21. Mac what do you think of the European move?

    They will not bail out the banks, are going to prosecute or at the least seek recompense from any of those in the financial institutions who have been found to be neglectful and all costs are to be worn by the share holders, taxpayers will not be levied in anyway to help their financial industries.

  22. Adrian,

    I’ll buy into this one…it might be harsh but it will certainly put an end to the culture of greed.

    I’m not sure that this bailout will work…it might be a suspension of the inevitable…if it does work will the culture remain…abeit in an underlying way.

  23. Adrian

    I think scaper’s answer is about as balanced as can be offered.

    Both approaches are likely to be trial and and error.

    I’ve come to the conclusion that there are no clear cut answers to this crisis and no quick fixes. The culture of corruption and greed has to end and for that to happen a great deal of pain needs to occur for change to be effective.

    We’re in new territory now and frankly I don’t think the 1929 has anything on this crisis as far as wealth destruction is concerned. Perhaps many will learn to realise the importance of need over greed.

    On a positive note I believe important human values can now emerge out of the rubble and take their rightful place as our number once priority. And even that is a pipe-dream at the moment. I remain very hopeful though.

  24. John,

    Unfortunately over time society had to regress to progress…I see pain ahead but mankind seems to know no other way to learn, even when history dictates that we are going down the right track.

    Do you remember way back at Tim’s when Tom of Melbourne was tearing strips off me because I said that people need to be taught a lesson?

    Well, the lesson is soon to begin…it will be painful for me to watch.

  25. In the old days of Europe the over indulgent wealthy would eventually face revolutions and guillotines. There’s only so much indulgence ordinary folk will take before retaliating, and that tolerance is incredibly high.

    As you say scaper in the long run it might have been a good thing this happened so a lesson can be learnt. The question is has it been learnt?

    Europe seems to have learnt it but it has always been in the centre of overthrows and revolutions. America threw off the over indulgent British yet seems to be the one country that hasn’t learnt a thing as McCain through deceits and lies really has a chance of winning and he plans to completely unleash the greedy by taking off the last of the meagre restraints they currently have.

  26. Right track???

    Must be TB’s affliction is catchy…LOL!

  27. Had to laugh at this cartoon in yesterday’s paper:

    Dear George,

    Just thought I’d let you know that I’ve decided to get out of the terrorism business.

    Looks like you’re doing a pretty good job of destroying capitalism and the western world on your own, so there isn’t really much left over for me to do.

    Perhaps we can catch up for a round of golf sometime? Keep up the good work.

    Yours Sincerely

    Osama Bin Laden.

  28. Reb

    I’m starting to think that Al Qaeda knew George W would be a major contributor to their cause.

  29. Why has the market fallen so much today, or for that matter on many other similar days? Many explanations have been offered, most of them plausible. But I wonder how many Mums and Dads are bailing out of their shares at this very late stage. My guess is that, as usual, the market is being manipulated by the big boys, the fund managers, the hedge fund operatives and the very wealthy. They can push the price lower simply by selling large parcels of shares, then by buying them back at a lower price make a handy profit.

    If only the market could rid itself of these parasites who by virtue of their selling and buying power can push the market up or down without doing anything productive. I suppose it’s impossible while the ‘Greed is Good’ philosophy still abounds in the stock market.

  30. Ad Astra:

    “They can push the price lower simply by selling large parcels of shares, then by buying them back at a lower price make a handy profit.”

    True. It’s called ‘short-selling’ and was banned in Australia two weeks ago by ASIC.

    It was also banned in the US, but somewhat bizzarly the US is going to lift their ban from this Thursday.

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