This is Doug Tengdin from Charter Trust with the Global Market Update for Wednesday, October 15th, 2008. So what’s needed to fix the banking system?
Many point to a four-part solution: keep plenty of cash in the system, recapitalize major banks, end the deleveraging, and move from to policies that take the punch bowl away when the party gets hot.
So how are we doing? Liquidity? Check. The Fed has already pushed hundreds of billions into the system. Capital? Check again. The Bank of England and Paulson’s rescue fund are finding banks to support as we speak. Deleveraging? Working on it. The other $450 billion in the plan should help, but the market’s plunge has made many investors leery of risk, and leverage is always risky. Policies? Too soon to tell. That part is still in process.
So given the incomplete picture, it should come as no surprise that the markets are choppy. No one can pick a market bottom perfectly, but the volatility and negativity that we’re seeing is often typical of market bottoms. Hang on-we’re still in for quite a ride.
Douglas R. Tengdin, CFA
Chief Investment Officer
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