Thursday, January 10, 2008

Begining of the end or the end of the begining ?

So does a deal between Bank of America and Country Wide signal as Jim Crammer says the beginning of the end of the sub prime lending debacle? Or as it looks to me a company desperate to cover up a so far failed investment by buying the whole company and merging it into a far larger balance sheet so no one will be the wiser? I been thru this before weather it’s the Latin American crisis, saving and loan debacle or 1998 Asian Contagion and I am bit skeptical. So far we have heard many times that after this write down we will finally be getting our act together. Yet write down after write down is met with cheers then groans when we get the “oh by the way we omitted to mention” ….. The devil it seems is in the details.

The second issue is the FED which seemed to bemired into the stumble and then recovery mode, I am just not feeling the leadership, just too many mixed signals. My other problem with the FED is that I just think the credit markets are dysfunctional right now, it’s not the rate of interest, it’s the lack of availability that is the issue, which if it continues could lead to a serve credit contraction.

The next problem is once again leadership in Congress and as the Congress once pressed to lend to all ,credit standards be damned, they now look to punish those that followed their lead . My fear is that the political fix may inadvertently stop lending all together.

This blogger has seen over the years that 9 times out of 10 times all roads lead to Citi bank so I am sticking to my original prognostication .Which is until Citi cuts its dividend I think there is just way to much risk not accounted for on balance sheets to say the bottom has been reached and we see light at the end of the tunnel. My bet is that we are more likely at the end of the beginning, than the beginning of the end.

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