This Is Insanity! Again!

Boy, what a ride! America's financial markets are reeling from unprecedented events that just won't stop.

• Bear Sterns is propped up by the Fed.
• Fannie and Freddie are taken over by the Feds.
• Lehman Bros is allowed to fail and go bankrupt. Barclays buys up the pieces.
• Merrill Lynch is sold to Bank of America.
• AIG, the worlds largest insurer is given a bridge loan by the Feds for $85 billion to keep it open.
• The Russian stock market is closed for 2 days due to panic in their market.
• The Fed has had to inject 10's, maybe 100's of billions into the system to keep banks afloat due to liquidity issues as all of the financial institutions are hoarding cash. Same with other foreign central banks throughout the world.
• The two remaining US Investment Banks, Morgan Stanley and Goldmans, despite positive earnings reports and very positive overall positions, see their stock continue to tumble and are looking to merge with someone to help make it through this.
• Gold goes over $850 and Treasury's are flooded as investors seek safe havens.

What does this mean? What's going to happen and when is the bleeding going to stop?

Looks like everyone in the financial markets are running scared right now, with no confidence that the problems, whatever they may be, will be corrected soon. The markets totally depend on confidence and trust and perceptions. Right now the perception is that the popcorn is about to hit the fan.

How deep will this go?

I'm just an uneducated observer, but it looks to me that while there is plenty of cash in the system, with a lot of strong companies and fundamentals that in normal times would bolster the economies, it looks like the market is going to go further downward until they perceive the bottom has been reached. And it ain't going to be pretty.

I don't think there will be runs on banks and the like. But I do think the real estate crisis in America will deepen and will cause a lot of job losses, a lot of homes lost and the accompanying problems.

We'll come out of this, we always will, but now is the time to be a little more cautious and to watch things just a little closer.