BBC: Bernanke says US 2008 outlook worse

Taken from the BBC News Website, 10th Jan 2008.

Well, at least he’s admintting it, that’s the first step to dealing with the problems. Here, according to Berite & Co., everything is just fine and dandy and the only risk is people talking the economy down.

Blue Horseshoe

And the DOW jumped 1.5pc on his comments!!!

Kerry, you’re worse than the bears you despise so much when it comes to positivities.

A cursory glance at Bloomberg will tell you that BofA are likely to buy Countrywide.

In fact, I’d go so far as to say they were effectively told to buy Countrywide by higher secretive powers. Conspiracies aside, if Countrywide were to go belly up, it would be like dominos. So a quick, unhesitant removal of the dying body before the kids see it is in order.


Kerry is correct. The markets reacted positivly to the remarks because they viewed them as a statement from the Fed that it recognised the threat to the US economy and would act in such a way as to, at best “head 'em off at the pass” and at lest mimimise the impact of the slow down.

Where as here in Ireland … business as usual, move along now, nothing to see here. And when economists or central bankers here move to highlight risks they are denounced by the political class. Any wonder that international investors are taking money out of Irish stocks. How much longer before foreign investors with businesses here being to reasses their position in, as I’ve heard one UK ecomomist call Ireland, “Fantasy Island”.

Blue Horseshoe

Er, aren’t Countrywide (and the other financials) on the S&P?

So which one bears a startling resemblance to our dear leader? And to our dear deputy leader?

Mines a Bass there Scaramanga!

Yes, Countrywide are on the Dow, but once BofA announced their intentions, the FTSE had an afternoon rally (which in turn corresponds to an Irish rally – the westward looking mentality occurs on stockmarkets too you know).

Bernake coming out with a remark that the “US economy has worsened” would have had a negative effect on the Dow/afternoon FTSE, but this was swamped by huge positivity the market saw in BofA’s announcement. Hence the rises. The rally was not due to kerrynorth’s assertion that positivity flows from negative announcements by Bernake.

I believe you are wrong on two points:

  1. Countrywide are actually on the NYSE.
  2. Mr. Bernake admitting things are bad indicates the likelihood of a larger cut in Fed fund rates at the next meeting than previously looked likely. I believe the markets think he is going to save the American economy with lower interest rates which will make it cheaper for indebted industrials on the DOW to refinance the huge M&A debt many companies have taken on. I do not believe that the BoA rumour has had any effect on a share price other than on Countrywide’s - the likelihood of Countrywide bankruptcy has diminished.

Kerry going on about the Dow, you going on about the S&P, then the NYSE, whatever – they’re easily confused by non-traders. The point is that the reason for yesterday’s mid-afternoon market surge was because of rumours that BofA would buy Countrywide and not negative comments from Bernanke.

I think Yogan’s right on this one. The market surged because they believed the Fed was going to cut rates, that’s why counter-intuitively it rallied when Bernanke said things were bad.

Index-shmindex eh?

Mind you, I agree with your earlier point about BoA being ‘told’ to buy CFC. Someone else who does: … untrywide/

I think that BoA will be buying the assets at firesale prices and taking over the deposits according to FDIC rules. CFC is effectively bankrupt and is the latest shoe to fall - how many shoes does the US financial sector have? It might be apt to call it the Imelda Marcos of the financial world!

Bad news is good news.
Good news is very good news!

Being a leading economist I would tend to agree that the ‘BofA to buy Countrywide’ news was the impetus for the rally yesterday.
Bernanke basically endorsing the widely held view that things in general are quite shite wasn’t enough in its self to trigger the sudden spurt.