07 – Bernanke and Paulson Blew It

miked | Aug 11, 2007 | Comments 0

After being slapped around for 3 weeks, the market was overdue for a bounce. Monday, Tuesday and Wednesday were quite accommodating as the DOW rallied 286, 35 and 153 points. Just as soon as we thought the water was safe, we were hit with a 380 point loss on Thursday. The subprime mortgage fiasco that Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson so often said was contained reared its ugly head in a major French bank.

Can you imagine wanting to redeem your money from a fund and being told not right now? That’s what France’s largest bank, BNP Paribas, did. It froze $2.2 billion worth of funds citing U.S subprime mortgage issues. This was only a week after saying it would not be affected by US subprime loans.

Wall Street’s financial engineering has led to subprime mortgages being sliced, diced and sold all around the world. BNP Paribas showed that most institutions owning this garbage are just discovering what is really in their portfolios. Subprime slime is far from contained. Bernanke and Paulson blew it. Read More.

The announcement by BNP Paribas kicked off a global stock market sell off that traveled from Europe to the U.S and finally to Asia. Friday’s market was setting up for another whipping, when the Central banks in Europe, Asia and the U.S. intervened to calm investors. For some reason, I don’t believe the next intervention will be as calming.

Believe it or not the DOW, S&P 500 and NASDAQ were up 0.4%, 1.4% and 1.3% respectively for the week. Semiconductors were up 3.4%.

Gold and silver showed some signs of life on Friday as its safe haven status is being rekindled, but for the week it was down 0.4% and 2.2% respectively. Oil was down for the second week in a row losing 5.3%. Copper took it on the chin by losing 3.4%. Gold stocks as measured by the XAU squeaked out a 0.4% gain.
The TTaMG portfolios have fallen and are having a problem getting back up.