Is this the Final Capitulation??Submitted by InvisibleHand on Mon, 09/15/2008 - 18:07
Thanks to RP I finally see the markets clearly:
It is certainly feels like the panic selling typical of capitulation at this point, at least for the financial industry. However, I foresee more pain in the horizon. When you have financial institutions using so much leverage to support depreciating and overvalued assets, it is difficult to see the light at the end of the tunnel. This is especially true when you know that some of them are just now being forced to liquidate these assets in distressed sales which will force more asset writedowns at “healthier” financial institutions.
Everyone is looking to the government for the solution. Although the government let the bears devour Lehman Brothers, I do not expect them to be relatively hands off for much longer. I could easily envision the federal funds rate eventually getting close zero and other “creative” assistance offered to the likes of Citigroup. I do not see how AIG will survive or even Washington Mutual without intensive government assistance but I am not so sure that they will get what they need in time to avoid bankruptcy. Even though Washington Mutual says it has “easy access” to over $50 billion in liquidity, I don’t think it is wise to underestimate how close it is to a classic “run on the bank” or how much they will have to discount their $270 billion in mortgage assets.....