Monday Links

The overstatements of the asset bases at Fannie & freddie are egregious but the "nationalisation" recapitalizes every bank balance sheet. Bank shares will rise dramatically today, all of them breaking a long-time downtrend. Similar to the nationalisation of Japanese banks in 2003, this should be a turning point for the equity markets.

Also, the Treasury is in the market buying mortgage-backed securities which boosts money-supply and this kick-starts the credit process, i.e. bank lending. This lessens the chance of a hard-landing recession. Sorry, What but with a stronger dollar these assets look a lot more attractive to foreign banks and governments.

Data out over the weekend from the much more broadly based CoreLogic index (as compared to Case Schiller) points towards a slowdown in the downward acceleration of home prices across 950 cities ( vs. Case Schiller's 20 city index). This is VERY significant. A slowdown in the downward acceleration is a prerequisite for a borroming, which now may be in sight.

Posted by: daveinbedstuy at September 8, 2008 9:08 AM