Chris Lau - Seeking Alpha

Monday, September 29, 2008

Excerpt from TSG Weekly Market Watch
September 26, 2008

Written by Matt Blackman

About the $700B Bailout plan
  • They are highly inflationary and even if they do temporarily work, result in rapidly eroding buying power as government deficits soar and the value of the dollar plummets
  • Recessions are a necessary part of maintaining healthy capital markets longer-term. They remove excesses that have been built up over years of easy money and rapidly appreciating asset prices as the inevitable bubbles build. To try to interrupt this cycle makes about as much sense as trying to suspend the law of gravity

  • August new home sales fell 11.54% from July and are now down 34.4% year-over-year. All the bailouts and money pumped into markets have yet to have any impact on sales according to the latest Census Bureau data.
  • July marked the first time since the bubble began to pop that the excess of homes being build (red area) exceeded sales and as we see from the chart, this situation continues to plague builders.
Stock Market:
  • Every sector remains in a technical downtrend demonstrated by a series of lower highs and lower lows.

We will have to wait to see if the bailout has a positive impact on this but as we have said in the past, this is not a liquidity problem, its is a solvency crisis that no amount of liquidity will cure.

Full Article here: