Comments on: US Market Cap has Fallen $5.8 Trillion Since Capital Markets Froze http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/ Tue, 07 Sep 2010 19:18:59 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Peter http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-416 Peter Mon, 06 Oct 2008 23:40:15 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-416 Folks - the Federal Reserve balance sheet (Reserve Bank Credit) is exploding. It grew by over 300 billion (+30%) in the week ended 9/25. It grew another 150 billion (+15%) in the week ended 10/2. My numbers are rough but this is from the H.4.1 release that comes out each Thursday. We'll soon see if this kind of aggressive central bank action can stop asset deflation. As a prior commentor said, I'm not holding my breath. Folks – the Federal Reserve balance sheet (Reserve Bank Credit) is exploding. It grew by over 300 billion (+30%) in the week ended 9/25. It grew another 150 billion (+15%) in the week ended 10/2. My numbers are rough but this is from the H.4.1 release that comes out each Thursday. We’ll soon see if this kind of aggressive central bank action can stop asset deflation. As a prior commentor said, I’m not holding my breath.

]]> By: Randy http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-415 Randy Mon, 06 Oct 2008 20:41:08 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-415 John - The monetary base has indeed been stagnant for over a year. (For me this was a strange counterpoint to the soaring commodity prices and the falling dollar.) However, according to the numbers reported in Barron's, the monetary base has been surging in the past couple of weeks. Is this a good sign? = randy John – The monetary base has indeed been stagnant for over a year. (For me this was a strange counterpoint to the soaring commodity prices and the falling dollar.) However, according to the numbers reported in Barron’s, the monetary base has been surging in the past couple of weeks. Is this a good sign?

= randy

]]> By: Dr. Kenneth Noisewater http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-414 Dr. Kenneth Noisewater Mon, 06 Oct 2008 15:20:02 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-414 <i>Last time we created a superbuyer–the Resolution Trust Corp set up to fix the S&L mess–the Fed followed the wrong policy by failing to generate the demand necessary to buy the auctioned assets without deflating their prices. As a result, land prices fell for 4 years in a row during the RTC years. We can’t afford this to happen again.</i> The difference is those inflated prices were as fake as the mortgages they were built on. Insofar as home prices exceeded 70 years worth of 'standard' pricing (2.5-3x area incomes, or 100x comparable rent), there has been imaginary pricing that will either (a) come down to reflect real salaries and rents, or (b) be realistic when wages rise to meet it. I'm not holding my breath on (b). Last time we created a superbuyer–the Resolution Trust Corp set up to fix the S&L mess–the Fed followed the wrong policy by failing to generate the demand necessary to buy the auctioned assets without deflating their prices. As a result, land prices fell for 4 years in a row during the RTC years. We can’t afford this to happen again.

The difference is those inflated prices were as fake as the mortgages they were built on. Insofar as home prices exceeded 70 years worth of ’standard’ pricing (2.5-3x area incomes, or 100x comparable rent), there has been imaginary pricing that will either (a) come down to reflect real salaries and rents, or (b) be realistic when wages rise to meet it.

I’m not holding my breath on (b).

]]> By: Eric http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-413 Eric Mon, 06 Oct 2008 03:20:05 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-413 John: I've been following your blog since I saw you on Fox News a week or so ago. I think you have a very interesting perspective on the US economy, and I tend to agree with you on your recent analysis of the financial crisis. In terms of the US dollar index and foreign exchange rates, do you see recent strength in the dollar as being only temporary, or do you think it will continue to strengthen in the near term? Thanks for your time and consideration, and I look forward to your reply. Eric John:

I’ve been following your blog since I saw you on Fox News a week or so ago. I think you have a very interesting perspective on the US economy, and I tend to agree with you on your recent analysis of the financial crisis.

In terms of the US dollar index and foreign exchange rates, do you see recent strength in the dollar as being only temporary, or do you think it will continue to strengthen in the near term?

Thanks for your time and consideration, and I look forward to your reply.

Eric

]]> By: Chad http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-412 Chad Mon, 06 Oct 2008 01:57:39 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-412 John: I have followed your work and analysis for some time now and tend to agree with your perspectives generally. With regard to your latest blog post discussing the Fed’s actions over the last several months to keep a lid on monetary growth, I too am concerned about this issue. It is disconcerting to see the Fed (and especially the ECB) be so consumed with inflationary concerns in the face of a deflationary credit crunch tsunami. My question is do you ever forward your comments to the Fed or have any contacts therein where you can share your insights? It seems either our monetary authorities are blind and or incompetent, brilliant and see things we don’t see, or apathetic and content to “see what happens.” Anyway, any influence you can have on their thinking due to your connections and intelligence would be great! Thanks so much for your time and analysis. Chad Chad-Thanks for your note. I have been pounding on this issue in a series of conference calls with the White House advisors over the past several weeks and encouraged them to transmit the message to the Fed but have not had direct contact. Goodidea though. Maybe I will go knock on their door and see of they answer. John John:

I have followed your work and analysis for some time now and tend to agree with your perspectives generally. With regard to your latest blog post discussing the Fed’s actions over the last several months to keep a lid on monetary growth, I too am concerned about this issue.

It is disconcerting to see the Fed (and especially the ECB) be so consumed with inflationary concerns in the face of a deflationary credit crunch tsunami. My question is do you ever forward your comments to the Fed or have any contacts therein where you can share your insights?

It seems either our monetary authorities are blind and or incompetent, brilliant and see things we don’t see, or apathetic and content to “see what happens.” Anyway, any influence you can have on their thinking due to your connections and intelligence would be great!

Thanks so much for your time and analysis.

Chad

Chad-Thanks for your note. I have been pounding on this issue in a series of conference calls with the White House advisors over the past several weeks and encouraged them to transmit the message to the Fed but have not had direct contact. Goodidea though. Maybe I will go knock on their door and see of they answer.
John

]]> By: Bruce http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-411 Bruce Mon, 06 Oct 2008 01:05:45 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-411 It seems to me that when the FED buys the junk from the banks, the banks have more money to spend on loans, bonds, stocks etc, and that security prices will INCREASE. It seems to me that when the FED buys the junk from the banks, the banks have more money to spend on loans, bonds, stocks etc, and that security prices will INCREASE.

]]> By: monte brown http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-410 monte brown Sun, 05 Oct 2008 00:45:34 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-410 curious as to how this view of the Fed is affecting your own investments. Have you changed your allocations between stocks, bonds and cash? For those of us in our 40s or younger who need to take a longer term view of our investments and lean more towards growth and equity, do you have any thoughts? curious as to how this view of the Fed is affecting your own investments. Have you changed your allocations between stocks, bonds and cash? For those of us in our 40s or younger who need to take a longer term view of our investments and lean more towards growth and equity, do you have any thoughts?

]]> By: ItSureIs http://rutledgecapital.com/2008/10/03/us-market-cap-has-fallen-58-trillion-since-capital-markets-froze/comment-page-1/#comment-409 ItSureIs Fri, 03 Oct 2008 21:35:05 +0000 http://rutledgecapital.com/rutledgeblog/?p=1130#comment-409 It sure is a GDP problem. Watch and learn. It sure is a GDP problem. Watch and learn.

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