While it remains to be seen what happens tomorrow, for today at least the stock markets were soaring following the rejection of the bailout in Washington. Financial stocks that were orphans yesterday were favorites of the crowd today, recovering much of what they lost in yesterday's panic. This behaviour by the market is very encouraging for the future. It means that market traders do not see all being lost in the frenzy of bad news and bank failures. Indeed, the sale of Wachovia to Citigroup and the likelihood that the mark to market rules will be changed give many the feeling that the crisis may indeed be manageable without the $700 billion bailout from the Treasury. After all, by changing the mark to market rules, the banks may well be able to avoid billions of dollars in paper losses that were the result more of frozen markets than of a long term loss in value. This change could reduce the amount needed for the bailout to a price much less than the original $700 billion.
Of course, everything may change tomorrow when the next round of trading begins, but for now, lets hope that the markets are able to continue on a cautious upswing or at least the end of the collapse.
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