Reality Sets In

Not much to say about today. Many of the pundits said that the last hour in the equities market was the capitulation trade that everyone is waiting for in this market. Even a broken clock is right twice a day. The Fed meets tomorrow amidst the hue and cry for rate cuts. If they are going to do it, it better be big, meaning in excess of 50bps. Otherwise, we are back to watching the Fed ,meeting after meeting, trying to devine what they will do next. Not that I thing it will do very much. Rates have come down 325bps in the past year and even accounting for the lag time, rates that matter to people and companies, mortgages and borrowing costs haven't done very much. Banks don't have any capital to lend, and even if they did, the only ones that want to borrow are doing so out of desperation.

I went back and checked this blog, reviewing the numerous entries screaming for transparency in the credit markets. Here we are a year+ later and the books are still as opaque as ever. This is the real problem. Things will not get better until all involved come clean about where they have their crap marked. When I couldn't find a price for something and didn't have a reasonable (not a black box model) basis for where I had something marked, I marked it at ZERO. Of course, I wasn't levered 40 to 1.

The good news is that we are finally seeing the beginnings of the resolution. While I was genuinely sorry to see Lehman go (they were my first employer, starting in 1981 right on through to 1994), they had the chance to do the right thing. I learned my lesson; I have some of their wallpaper stock now. The faster the rest of them go, the better in the long run. We may need a RTC-like vehicle to unwind all of this. Congress should start on this now. The longer it goes, the worse it gets.