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Market View: What News Could Finally Signal A Bottom?

July 12, 2008 12:38 PM

plastichouse.jpgI have long mentioned that this is a fundamental downturn, not a cyclical one, and that fundamentals have to dramatically change to change that view. With that said, considering “hope springs eternal” in the markets, in general, what news could cause a possible bottom, or at least a near term bottom?

I believe a signal to the possible end, or at least some type of hope for a bottom in housing, HAS to take place before it is even possible to consider an economic bottom, let alone a possible recovery.

The Senate finally passed the housing bill Friday that would allow financial institutions to shift “their crap” to FHA at a discount to the current market values, if they so choose to do so. While this is possibly a massive risk to taxpayers (and most likely is), this would allow the banks to take one last MASSIVE writedown and finally signal and end to this housing fiasco. This bill still has to pass the house and the president would need to sign it. There is a provision (a very stupid one) in it that “gives” $3.9 Billion to lenders to “fix up foreclosures” and the President has said he will veto the Bill if this is not removed.

I completely agree with the President on this issue. This is not only literally a taxpayer gift to lenders holding these properties, it is also nothing more than another welfare program. The inner cities want this money so they can “fix up distressed areas”. Meaning they want taxpayer money to rebuild the inner cities where virtually all homes are in foreclosure. At some point in this country we have to stop with this nonsense that the government is going to “give” people money because things did not work out. The taxpayers ARE the government from a financial view. We are paying this money. Quite frankly, I am tired of this mentality, but whatever.

Anyhow, I believe if this bill passes and is signed by the president AND you see one last massive write-down from financials, that will likely signal the bottom for financials. And make no mistake, as I have mentioned many, many times, they are still holding many billions in bad loans that I believe they are not disclosing. This could finally put one final bottom, one final write-down, and provide some clarity as to what their balance sheets really hold.

Written by Tom@StockBlade.com · Filed Under Current Market View 

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