Sunday, October 19, 2008

Market Reaction to $700 Billion Bailout House Vote

Updated on 10/19/08

This $700 billion bailout is purportedly needed to stabilize financial markets and get credit flowing again (assuming it was ever really frozen).

The bailout -- first proposed on 9/23/08 -- was approved by the House on 10/3/08 at 1:22 PM EDT.

So, what was the initial reaction?

Anybody still naïve enough to actually believe what The New York Times says would fall for this line:
“Financial markets had a positive but hardly exuberant response to the House action and the prospect that the Federal Reserve would also move to cut interest rates to help the ailing economy. Just after the bill was approved, the Dow Jones industrial average was up about 115 points.”
The data, however, tell another story. Remember, the House approved this bailout at 1:22 PM, EDT.

After 1:22 PM, EDT, all three major stock market indices declined.
Click the chart to enlarge it:
Click the chart to enlarge it
Click here to recreate the above 1 day chart of 10/3/2008.
Update: Intraday charts are only available 15 days back.
This one is no longer available.

Update - 10/19/08:
Paulson made his bailout plea on 9/23/08. The markets reacted negatively.
The bailout was approved on 10/3/08. The negative reaction has been PROFOUND!
Click the chart to enlarge and view the source:
Click the chart to enlarge and view the source
Click here to recreate the above chart.
Select a start date of 1/1/2008 and an end date of 10/19/2008.

The odds of a recession in 2008, as expressed at Intrade,
jumped from 28% to 34%.
Click the chart to enlarge it:
Click the chart to enlarge it
Click here to recreate the chart from the source.

Update - 10/19/08:
Since the bailout was approved on 10/3/08,
the odds of a recession in 2008, as expressed at Intrade,
have risen to 56.3%.
Click the chart to enlarge it:
Click the chart to enlarge it
Click here to recreate the chart from the source.

The “TED Spread” is the closest thing to an indication we have seen to date which INDIRECTLY suggested that MAYBE there existed a “Credit Crunch”.

If bankers expected this bailout to make any difference, would we see maybe at least a slight drop in the “TED Spread”? Nope, After the House vote, the TED Spread ROSE!

Ron Paul got this one right:

FDR took a bad situation, made it worse and prolonged the pain.

Our Congress just GUARANTEED that we will repeat the mistakes of FDR! I doubt this will mean the second coming of the Great Depression. But, what is CERTAIN is that Congress just made our present mess WORSE (as usual).

We told you so!

Nice “work” Congress! I’m betting your 9% approval rating just went LOWER!

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