Below 8,600. Seriously.
Mario Tama/Getty Images
When I was doing my piece on naked short selling, one of the things short sellers told me, and will tell anyone who'll listen, is that they provide a floor for the market.
What that means is this: In short selling, you borrow the stock you want to short from someone, sell it at a high price, wait a while, then buy it back at a low price and return it to the person you borrowed from. That buying back is key. If you don't buy it back, you can't return it to the people you borrowed it from, and that would be bad for you. So, while short selling, it's true, might lead people to target certain companies they don't like, it also insures that there will be buyers, since the short sellers will have to enter the market eventually to repurchase the stock they shorted.
Now, during this last week, when the Dow has been dropping like a feather on the moon, there's also, perhaps not coincidentally, been a ban on short selling. Could the short sellers' dire warnings be coming true? By removing them from the normal functioning of the market, Securities and Exchange Commission chairman Christopher Cox might have removed the very people you can rely on to stop a stock market plunge. Has he, in effect, made things worse by trying to make things better? It certainly wouldn't be the first time that's been true of government intervention in the free market.
Alex Blumberg
6:44 PM ET
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10- 9-2008
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Our good friends at Slate's The Big Money agree with us that you should feel free to ignore the Dow and pay a lot more attention to the Ted Spread.
They have a great primer on the scariest number in the world.
Adam Davidson
5:11 PM ET
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10- 9-2008
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Amid all of the economic nuttiness of the past few weeks, there is one thing that's for certain: all of this isn't likely to end until housing prices fall back to their natural levels.
So how far are prices likely to keep falling? It's anyone's guess really. But there are some key indicators that economists point out -- and, of course, then disagree about -- that probably provide some hints.
Historically, home prices have increased roughly in line with real income growth. That was until about 2001.
(Update: added below is a comment from reader Dan Schlung for you math whizes. He crunches his own numbers and figures out it will be 2.19 years before he sees prime home prices in his native Chicago.)
Continue reading "How Far Will Housing Prices Fall?" »
Daniel Costello
2:16 PM ET
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10- 9-2008
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So much depends on Larry Ausubel.
NPR
Larry Ausubel (above) and Peter Cramton at the University of Maryland have laid out a detailed plan for how the government might go about buying up hundreds of billions of dollars worth of those toxic mortgage backed securities no one wants with something called a "reverse auction."
They're two of the world's experts. And they've been talking with people in the government.
I went by to see them yesterday.
"This would be the largest auction ever," said Cramton. "That anybody has been involved with on the planet earth."
There are lots of tricks to making sure the auction gets you a fair price, and can't be gamed by some clever wall street guys.
Continue reading "The Biggest Auction, Ever " »
David Kestenbaum
1:35 PM ET
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10- 9-2008
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Nobel Prize-winning economist Gary Becker and legal heavyweight Richard Posner have a joint blog that's a terrific read.
This week, Becker has an interesting piece on why news that the feds want to take an equity stake in banks is a bad idea. He worries it will lead to government getting involved in business decisions. Could a congressman demand a bank open new branches in their district? Or stop a company from moving jobs oversees even if the unpopular move saves money? The two also have some comments about limits on executive pay.
Daniel Costello
10:35 AM ET
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10- 9-2008
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