our assets are distressed, finding a bottom - Oct 9

How much is my house worth? - pt2.

Certainly the market does play the social role of ratifying the value of an asset,
such as my home, through the measure of price. but as we can see in the current
financial mess, the market might cease to function for all practical purposes for
some assets. Looking at the demand side, we see that deleveraging is freezing the
lending of credit, which during the bubble in home prices has supplemented the flat
incomes of americans. A sharp rise in income disparity between the rich, siphoning
off the tributary of profits from financial leverage, and the rest of us has skewed
the valuing process for essential assets such as our homes. rebalancing income
disparity and reducing an over-reliance on credit is essential to discovering a
price of our homes which is more reflective of what we value as a society.

What effect will the bailout and other Treasury-Fed interventions have on the
discovery of a price for troubled assets?

Freudians will recognize the similarity of our orphaned troubled assets and the
role of repression in the operations of our psyche. We need to keep hidden that for
which we cannot find a sustainable value or interpretation. Our experience remains
hidden away, undigestable and forever private and uncomfortably provactive until it
can find its social meassure. Similarly, our overleveraged, bloated mortage-based
securities can not be left to the social valuing of the market without fear of
peering deeply upon the truths our economic lives structured upon the greed of
wall-street casino financing for over a decade. Our fathers, Greenspan, Rubin, the
ceos of wall street have let us down. Can we resolve our oedipal complex?

finding a bottom
the deus ex machina of the economy has been the panoply of leverage techinques
twinned with the supposed protections of varied versions of derivative insurance.
this army of enablers, the repo market, swaps, asset backed securities, sivs, even
commercial paper, all have ceased to function any longer to support the endless
needs of leveraged credit. the high-water mark of valuations on the stock market
was a year ago today, with the dow hitting 14000, since then the waters have
subsided 37% to our current mark of 8600. cash has fled to the side-lines of
government secured deposits and debt. with treasuries now providing insignificant
returns in exchange for their security, it can be expected that with the first
signs of the credit freeze beginning to thaw, cash will forsake the negligible rate
of treasuries for equities. treasuries can be expected then to fall sharply as
confidence returns to the stock market, this will spur the treasury to sell even
larger amounts of bills to service the debt, causing rising interest rates and
still greater push against the price of government debt. the dollar should then
come under pressure in relation to other currencies.