While every 3rd day some so called expert says the worst of the sub-prime crisis is done with, the market shows that well its all a plain and simple lie.
From a government perspective there’s a limit that the US and the Fed can take isn’t there.
Freedie Mac and Fannie Mae popped their ugly heads out after it was seemingly all over. And they said ‘it’s all over now’ after this one AGAIN!!!
HOWEVER:
Merrill has sold a chunk of toxic CDOs at 22 cents to a dollar and there’s no reason why we won’t see similar write-down’s from other Investment Banks. This again after the worst was done with.
Further the National Australian Bank on the 25th of July wrote of 90% of their US conduit loans.
Now don't investment banks need to rationalize their assets.
The only question here is, is it going to be slow and painful write-downs month after month or is it going to be one big write-off.
The great depression was a slow painful period lasting many years, and quarter after quarter experts then said it’s all over… did that make it any better…. The answer a resounding No. The post sub-prime is set to be no different. It's going to take a while before things normalize and the impact will be in years and years to come.
While this set the total write-offs are set to surpass $ 1 trillion, this from the $ 450 million written-off till date.
Besides this: The US economy grew at 1.9% in the 2nd quarter against an expectation of 2.4%. Further Labor Department data indicates that the number of people seeking jobless benefits jumped to the highest level in five years.
Well then folks times that we see ahead for the US are expected to be marred with further write-downs and further lies at every write-down trying to console the markets that it's all over. One day, in the distant future, they may be all over, but it still wont be all rainbows and butterflies.
-Puneet Gulwani
