The Market Moves Downward plus Credit Losses Mount

The markets reversed course yesterday whether due to exhaustion from the strong move up, profit taking on recent purchases, the anticipation of some soon to be reported horrible earnings numbers, or news that credit related losses continue to rise dramatically. According to RGE monitor “IMF Boosts Global Loss Estimate To $4 Trillion: RGE Monitor Calculates $1.8 Trillion Fall On U.S. Banks/Brokers, $2 Trillion On European Banks, Remainder On Asia.” I remember last year when the talk was that losses could hit $1 billion and the raging bears were predicting $2 to $2.5. The question is, and I will have to dig for the answer, how much of this losses have been effectively taken. With the new rules on mark to market accounting, meaning you don’t have to, they can be hidden for some time. It is somewhat ironic to me that almost on the same day the gov’t announced this private/public program to rid the banks of toxic assets, they changed the rules so they were less incentivized to do so. What also seems to be a little odd is that given the total losses are projected to be in the US around $1.8 trillion, if the gov’t just figured out a way to eat a good part of that upfront, would that not have been a lot cheaper then what they have done already over the past 12 months? Yes big number, hard to swallow, probably impossible to sell to congress and the public…. but, as my mother always use to say when taking a band-aid off me – “rip it off quickly, it hurts, but it is over”.

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