So, the world markets have no crashed and the world did not end. Markets are actually mixed the day after the “great sell-off”. Also take into account that DOW futures are 145 points in the positive makes one wonder if the market is OK with the current situation.

For those who blame Republican policy – not greed and poor oversight – please explain to me why Europeans are rescuing banks? Dexia, a large Belgian, wouldn’t be getting a $9.2 billion government bailout if this was simply a U.S. / Republican party issue, would it?

Finally, there is still no word on where we go from here….

I wonder what today will bring.

While it mean nothing in terms of the bailout, it’s nice to see the DOW futures poining to a positive open - up 76 points as of this writing.

For the biggest one day drop ever:

Late Saturday evening congressional leaders and the current administration reached a deal on the financial bailout which includes a staggered spending rate and is open to companies who deny “golden parachutes” to senior executives leaving the company. A bailout is what Wall Street was looking for, as noted by the drastic swings in the past two weeks, but how is the market reacting to the news?

Rather unimpressed, actually.

As of 12:01 AM Monday, September 29th, DOW futures are down 67 points showing that the market is heading to a lower open. Look at other markets currently open and one can see the rest of the world isn’t too excited about the plan either. The Nikkei is down half a percent and the Hang Seng is two percent in the red.

Maybe the poor performance of the market is due to the fact that the Bill still needs to be signed into law, maybe a poor economy is finally playing into the market, or maybe the stock market is unhappy with what is being proposed.

This week has the potential to be wild, let’ see what happens.

UPDATE: 12:36 AM

Asian markets are heading lower due to an increase in interest rates, sending property and resource stocks lower.  Financial stocks, however, rose – it looks as if the financial markets are reacting in a positive manner to the bailout.

There are a number of things that are being said in the news / press / world of blogs that I need to be addressed.

The Stock Market is not the economy

Without a doubt, the stock market is wild right now.  The press gets excited when the wild swing and destruction of capital takes place, but it has happened a number of times in the past – it’s all part of capitalism.  It happened in 2001, in 1990, 1987, early 80s… and on and on and on.

Corporate scandals, poor business practices, and just plain dumb luck will lead to situations like this all the time.  Currently, the financial industry is in disarray but this does not equate to an overall bad economy.  While economic growth is not historic highs it is also not contracting.  As of now, the United States is not, officially, in a recession.

The collapse of AIG, et al., is not a giant conspiracy

I want to know if people are still taking their medication.  More and more there are stories / commentaries that the bailout of AIG is due to the company being a front for the government or that we are heading into a financial dictatorship.

The reason AIG was given what amounts to a structured bankruptcy is quite simply. Their debt, the bonds they offered, was considered to be some of the highest-grade investment vehicles on the market.  Just about every major company in the WORLD owns said bonds and if the assets suddenly became worthless, the potential for failures of companies worldwide was very real.

The $700 Billion dollar rescue is the right thing

The creation of a Resolution Trust is the right thing to do and creates a bottom for the mortgage industry – the mortgages are now set with a value established by asset managers, backed by the government, and create a tradable security for the investment market.    Furthermore, as the real estate market improves the government will be sitting on A HUGE asset bank that goes right back into the treasury.

This is all caused by poor regulation, greed and policy

Yes, policy created this current situation, but it wasn’t Bush policy – it was Clinton policy.  President Clinton pushed extensive changes allowing lenders to distribute and fill “questionable” loans, his legislation – essentially – allowed the sub-prime mortgage industry to start.

In 2002, Ron Paul called for change due to the financial risk, in 2003 President Bush recommended a regulatory overall to prevent a collapse and in 2005 John McCain warned of a financial collapse but NO one acted.

Who failed to act?  Congress.

Bankers utilized the “loose” regulation and got greedy.  They started to issue loans to individuals who could not afford their loans and, next thing you know, boom there is a crash.

This is life…

The stock market, the economy and life are full of ups and downs.  What the government is doing right now is attempting to provide stability to the financial and credit markets, and as the economy as a whole.  Is it what I want to see in a free market society, no?  Is it the right thing to do, yes.

Talk about a wild day on Wall St. – Lehman Bro. is on the verge of bankruptcy and Bank of America has agreed to buy Merrill Lynch at $29 / per share, which is a $12 premium over Friday’s close.

Why the buy-out of Merrill and not Lehman?  While Merrill is also facing a number of debt issues, much like Lehman, their assets are considered to be superior to Lehman.  Merrill Lynch has $1.6 trillion in asset management.  Also, this purchase will allow Bank of America the ability to take Merrill’s 49.8% stake in BlackRock which has more than $1 trillion in assets under management.

This means Monday will see the transformation of Wall Street – Lehman will, most likely, go under and Bank of America will purchase the 94 year old institution known as Merrill Lynch.

Not a bad purchase on B o A’s part for $44 Billion.

Another hedge fund hit this skids this past weekend. The famed Ospraie hedge fund is shutting down its main investment vehicle after a 27% drop in fund value in the month of August and a total of roughly 38% for the entire year. While hedge funds are the unregulated playthings of the rich, often open to individuals with large personal fortunes, the investments are often very risky due to a lack of diversification.

In 2008 a number of funds closed their doors due to investments in mortgages, bad mortgages to be more specific, but the Ospraie shuttering opens a the gates for a new type of collapse – commodities. The feared commodity bubble may have popped and, as a result, investment firms with energy, mining and natural resources are starting to absorb heavy losses.

Plain and simple, there bets didn’t pay off and now they need to pay the bookie. As with banks closing, welcome to capitalism!

9/4/08 Update – MSN Money has a story on the situation as well

9/5/08 Update – Ospraie may have bet to much on Natural Gas