Angry Bear: Have we hit stagflation?
Rdan over at the Angry Bear Blog makes his case:
Is when Unemployment is 5% or more and when Inflation is 5% or more at the same time.
June 2008 – July 2008 (Un-5.6% and Inf-5.31%, 2 months so far)
BloggingStocks: Wachovia or Washington Mutual next to fail?
Economists are rallying to predict the next victim of the mortgage market anchor that has been sinking banks on a regular schedule over the last year. Who is next? Here is some of the latest handicapping:
According to Reuters, “The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said.” Rogoff is currently an economist at Harvard.
For investors, the issue is which large banks could go down. If stock prices are any indication, Wachovia (NYSE: WB) and Washington Mutual (NYSE: WM) are the most likely candidates. They have the weakest capital structures.
BlownMortgage.com: More Fannie Mae/Freddie Mac Bailout Prognostication
Morgan Brown at BlownMortgage.com piles onto the Fannie Mae and Freddie Mac bailout discussion. I think he is right.
Any government intervention or recapitalization would severely undercut the value of any current shareholder stock by diluting the living daylights out of it. Many had hoped that the mere notion of the US Treasury backstopping the GSEs would put an end to the market unrest. This drove Fannie and Freddie stock higher as investors gained confidence that the market would stabilize with the weight of a US government guarantee. Now that it looks exceptionally likely that it will actually happen investors are once again spooked.
Naked Capitalism: Thinks Paulson’s gamble isn’t likely to save the GSE from bailout.
So why is Paulson unhelpfully (as far as market confidence is concerned) denying that he will salvage the GSEs, yet moving forward to develop plans to do precisely that? Oh, I forgot. The SIV rescue plan. Hope Now Alliance. Getting China to open its financial markets. Having JP Morgan buy Bear for $2 a share. Execution has not been the Adminstration’s or Paulson’s strong suit. Why should now be any different?
HousingWire.com: Add Lehman to the list
Last month, it was fear that the Lehman Brothers Holdings Inc. (LEH: 15.03 0.00%) would need capital to survive as an independent mortgage bank; this month, it’s an emerging consensus that mortgage and related asset-backed woes are likely to yet again tug at the Wall Street firm’s bottom line. After inexplicably expecting Lehman to post a Q3 profit in the wake of second quarter’s $2.8 billion loss — the company’s first loss since going public — analysts are realizing that the bank still has some writing down to do.
WSJ.com: Inflation and Mortgage Mess Start to Turn on the Stock Market
Monday’s developments served as a reminder that the long-running mortgage debacle continues to lurk. Former International Monetary Fund chief economist Kenneth Rogoff predicted on Tuesday at a conference in Singapore that a large U.S. bank or investment bank could fail in coming months. Bear Stearns and IndyMac Bank have already been swallowed up by the industry crisis, as have other, smaller financial institutions.
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