For a wild week, Friday certainly ended with a whimper. US equity markets were flat until the very end of the session when they steered North. Oil was up most of the day before succumbing to late session selling. The US Dollar was essentially flat and bonds drifted down a few ticks.
The media trumpeted today’s failures as successes. A $9 Billion loss is good if we say we were expecting a $10 Billion one. Like August 2007 and March of this year, the media is unabashedly calling the bottom of the banking mess. Stocks will be higher etc etc. I beg to differ simply because nothing has changed. Think about it. The government pledged your children’s future to back Fannie and Freddie and the SEC decided to finally enforce one of its rules. That’s it. Fundamentally, nothing has changed. The bad debts are still there. Trillions of dollars of specific performance contracts (OTC derivatives) are still in place. The balance sheets of entities from the average household to Uncle Sam are in a shambles. The economy is still sinking. In other words, the fuel that has powered this fire so far is still there.
Nothing has changed.