Wipsaw - SP500, NASD100 fall on heels of rise; VIX hits 26, an amazing, but predictable double from year's start.Good News First
If you believe the markets are moving today because of "sub-prime", it's a buying opportunity. These markets will clear (I know it's hard to believe while its happening, but I've been at this a while ...). I could go on, but I want this note to be short.
[n.b. No investment advice is given on these pages, this is general economic and markets commentary].
The Bad News
...on several fronts.
For all those who think that the U.S. will always have willing lenders at the door, today is a show that, when the so-called "conundrum" unwinds, it won't be gradual. It's highly likely that the "reassessment of risk" will be sudden and painful and relatively 'unforeseen' / 'unforecasted' by the experts.
Oil is quite a lot higher than at the end of last year and and likely to remain that way (when I looked at the Iraq-war costs, I was looking at average of $56 for this year, not near $70!). The bloated housing market will take a multi-year period to clear. With any weakness in wages/earnings and employment, it could turn into a deep, multi-year period.
The slow working out of rising national wealth but declining median income (but not declining consumer debt) may be coming to roost, to be expressed in three ways (at least),
(a) medium-term decline in consumer credit quality
(b) some unknown amount of pressure on corporate profits and
(c) widening frustration with dis-proportionate representation in the Senate that frustrates the public's interest and a President who's cumulative misjudgments have now firmly strapped him to the anchor of the Heritage wing of the party.
By the way, problems with consumer credits are less likely to clear quickly, because of the GOP-inspired changes to personal bankruptcy laws.
