[J. Abizeid]

Originally Posted by Abou-Eddie

I just returned from Europe today and I can assure you that the word I heard the most during my trip is "catastrophy".

Was that old Europe or the new one you are talking about?

On a more serious note, I understand the European’s feelings you experienced. I was in Old Europe early this month but let me share my vision and observation just for the sake of argument.
The Europeans feel the pain because they are more honest and responsible. Their cost of living is high because they pay their dues and taxes. That is the basis to succeed in life as a nation or as a simple family.
Today, the world feels the pain because they trusted the US market they invested in and it failed them. It’s a lesson for the world but once they get over it, the US market will become a dinosaur.

http://www.marketwatch.com/news/story/wamu-fails-sold-jp-morgan/story.aspx?guid=%7B42316B59%2D4AB5%2D406B%2D808E%2 D931513D5763C%7D
SAN FRANCISCO (MarketWatch) -- In the largest bank failure in U.S. history, Washington Mutual Inc., with about $310 billion in assets, succumbed Thursday to the fallout from the subprime mortgage crisis, was seized by federal regulators and rapidly acquired by J.P. Morgan Chase for $1.9 billion.

WaMu is the last collapsing pillar putting more pressure on the rest of the pillars. As I mentioned before, there are over 100 US financial institutions in trouble that need to be bought out, bailed out or completely shut down.

Here is my observation on the $700B bail out:
It’s a rip off to the American people but still the least of two evils.
It will pass and make China and Europe breath again so they can live and learn.
As far as the market reaction, notice this:
Few days ago, when the approval looked imminent, the world stock market went up BUT, oil shot up to $130 and the dollar sank down against the world currencies.
When the deal started faltering, everything reversed course.
Oil prices fall as US bailout plan in doubt: Financial News - Yahoo! Finance
Oil prices decline more than $2 as US financial bailout talks falter
http://www.marketwatch.com/news/story/bush-says-financial-rescue-plan/story.aspx?guid=%7BCD93BC1C%2D7E6A%2D4E1B%2DB6E3%2 D1E347B654D3B%7D
Bush says financial rescue plan will be passed

And it will pass because that was part of the deal for China to rescue the dollar just before the Olympics.
And once it passes, many will make a killing from the one or two day spike in the stock market (that’s a given opportunity). But the dollar starts paying the price (and that has nothing to do with the euro itself)
I wouldn’t be surprised if they kept oil relatively low if they can afford it until after the elections. After all, the whole deal is mainly aimed at protecting the McCain candidacy.
http://www.marketwatch.com/news/story/dodd-says-white-house-meeting/story.aspx?guid=%7BF849F192%2DD0CD%2D4456%2DBC50%2 D751A5259D7F4%7D
Dodd says White House meeting was a disaster
I wouldn’t anticipate an abrupt reaction from the market immediately after the elections but that’s when the long term trend starts showing it real course.
By the way, I did suggest back in august the euro will remain between $1.45 and $1.49 until the elections. I sounded unrealistic back then but $1.4627 today is not too bad after all. I think I deserve some kind of credit for that one…
EURO vs USD

I don’t see oil go up until after the elections since it’s a Bush not a Clinton administration unless they come up with a twist that helps McCain with votes.
Meanwhile the euro remains between $1.45 and $1.49
After the elections, we’ll have a different picture. I expect oil and the euro start going up gradually but quickly.
They’ll blame it on high heating oil demand…

See you all in 2009