Sunday, April 12, 2009

Are We Halfway There Yet?

Thought I would just check in this Easter. Bailout news seems to have abated as the DJIA creeps back into the low 8000's, and with quantitative easing, mortgage rates are dropping to the 4%-range (mainly directed at refinancing), and the program to buy around $500B of toxic assets from banks at inflated prices is moving forward if not currently underway.

News keeps cropping up around how the rates of acceleration of worsening economic factors, such has house price declines and joblessness, is getting less bad as months go on, and eyeballing the economic situation, I'm guessing the credit unwind is reaching the halfway mark. There would still be around 2 years Alt-A resets ahead of us, and banks are still hanging onto a lot of foreclosed property to limit supply. Even after the credit bubble is fully unwound this all would still be followed by a period of economic contraction though tight credit, made worse by a declining tax base and increasing deficits leaving fewer bailout options as time goes forth.

But I'm guessing we are closer to economic stabilization by a return to fundamentals than we are to the speculative peak of the bubble. But I'm not believing calls that the correction is over and we can now look forward to good economic times.

In other words, I expect to see good news coming as prices move toward affordability.

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