I was really thrilled to hear that the senate has finally approved the package to save the financial world.
I am not sure how much the collapse of Washington Mutual would have made those senators feel that they finally need to do some work rather than arguing all over the place to maximize their political profit, but the fact that the agreement was reached on Saturday midnight is really an assuring fact to know.
However, what we have seen so far is a really disappointing picture in the Asian market, with the financial stocks continue to decline.
Why is that so?
Because people no longer have any confidence in the US economy.
Sadly speaking, the financial market in US would not stop to deteriorate just because of the 700 billion. In fact, some analysts claimed that the market needs as much as 5 trillion dollars in order to go through the current mess without getting hurt too much. Unfortunately, the fact that the rest of the world is reluctant in joining the US in saving the financial market means that it is very unlikely the government will be able to raise the fund.
On the other hand, even within the US government, as election approaches, no one seems to have that much interest in asking each US citizen to pay more than 2000 dollars to save the mistakes made by the Wall Street traders. Instead, they have promised tax reduction, which would means that the government would not be able to provide too much to save Wall Street.
However, what should we expect when the market opens tomorrow morning?
First, I think Wachovia is saved for now, after being treated as the next victim after Washington Mutual, therefore, we should see some good news for WB to bring the highly undervalued stock back a little.
Second news should be from the currency market, where we should see some advance in the US dollars as people are now confident that the wound would not be as large. On the other hand, the LIBOR and treasury should be a little lower as the financial institutions (even those non-US companies with large business presence in US) find themselves a little easier to borrow money to solve their liquidity headaches.
Let’s hope that this 700 billion dollars would really be able to give the investors some confidence, because…well, hope is all we have.