Nine months ago the average investor wasn’t worried about bank failures, Fannie and Freddie bailouts, oil prices, war with Iran or the credit crunch. There were still problems, but they seemed contained as we high fived the arrival of another new high in the Dow last October. The Fed had once again ridden to the rescue with interest rate cuts and new, innovative lending facilities. Why worry about bank stocks when you’ve got commodity stocks to take up the slack? What difference did it make that the housing bubble had popped? The commodity bubble would take its place just as the housing bubble took the place of the tech bubble, right? No problem.
Now, the prophets of doom enjoy their well deserved media attention. They were right; the sub- prime crisis wasn’t contained, Bear Stearns is a distant memory and the commodity bull turned out to be what it has always been - an indicator of inflation. The Fed rescue hasn’t worked and the losses at the banks and brokers turned out to be a lot worse than initially thought. According to the Nouriel Roubini crowd, there’s much more to come too. This won’t be over until we are mired in a deep recession or maybe even the Great Depression Part II. And by the way, there’s not a damn thing we can do about it.
Read it all here.