Friday, October 10, 2008

This is similar to the type of signals we're getting from the market....



The next time you are complaining about the traffic lights on Arsenal Street keep this in mind - imagine trying to navigate this combination of traffic lights (I think the photo is from London).

The markets rallied into positive territory briefly, but again because everyone is looking for the bottom we can't really find a bottom. If we're in this range around 3pm look for the sell programs to come in hard again.

There is a new plan circulating that would impose a type of economic Darwinism on the markets. Spend a couple weeks identify the strong and the weak banks, insurers, etc. Liquidate the weak firms and recapitalize the stronger firms. It's a painful, expensive proposition but this has the best chance at working.

However, I'd argue that even the "strong" banks are going to face increasing headwinds in 2009 as even the best borrowers start to voluntarily default.

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