Thursday’s short lived market optimism was assassinated by the guidance from the leading market participant’s regarding the upcoming holiday season. The Fed is trying to send positive signals to the market; to alleviate the realities facing those citizens who are penniless, hopeless, and in jeopardy from the choices made by the leaders in government (and business) over the past three years, that have mortgaged the future of America.
GMAC can’t lease cars to people unless they have credit scores above 720 which, as the economy tightens, represent a small percentage of buyers. It’s a domino effect that is far more important to stem than it is to bailout the banks, because even Reagan’s economic policies were named with the Regular Guy in mind (trickle down economics at least implied that the bottom would drink something).
Giving people another $10 billion in stimulus checks is not the answer. The answer is to provide time sensitive enhancements of the failed capital markets until a new business methodology is adapted to replace the old commercial paper, conduit based methods forged by investment banks since Fink drove First Boston to the top of the heap in banking in the 80s.
Large businesses have adapted time based market sales of Commercial Paper, and other conduit investment products, to allow their businesses to operate. As major firms are unable to tap the CP market currently, they cannot do business (imagine you swipe your American Express card and AMEX declines, because they don’t have money to pay the merchant). These methods are 20 years old and have operated without interruption during those years. The United States treasury, Congress, Senate and Executive office need to address enhancements and guarantees in these areas until the market normalizes.
We need to lengthen the time horizon, stop reading 1,000 point headlines with doom news, and realize that from December 1941-June 1945, business stopped in the United States for a World War, and we’re still here. We had 20% unemployment during the great depression and we’re still here. The outlook’s not rosy, but not worth jumping from a building over. If you buy the best companies in the market at these prices, you’ll look great in eighteen months. Don’t despair, America will find a way.
Be steady, careful and watchful. Good luck!