Self-Fulfilling Prophecy?

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The Chrysler Building in New York City was recently sold to Dubai.

Anheuser-Busch was purchased by Belgian brewer InBev SA, a company essentially controlled from Brazil.

Properties in America, commercial and otherwise, are being sold left and right.

However, if you recall in the mid-to-late 80’s, everyone was concerned when Japan apparently went on a buying spree of properties in the U.S. Yes, Japan made many purchases and then Japan’s economy tanked and those purchases became later sales themselves.
Much of this movement is opportunistic. Property is cheap, and not just at the level of the individual home. The dollar is weak and those able to do so are taking complete advantage of this fact but on a larger commercial basis.
What is truly starting to become frightening is the portent of all of this: the rumbling roll of growing fear with regard to the weak dollar, the stock market, the price of a barrel of oil — and now banks:

July 14 (Bloomberg) — U.S. stocks fell, sending financial shares to their lowest level since October 1998, on heightened concern that bank failures will spread.

Washington Mutual Inc. posted its biggest drop ever and National City Corp. tumbled to a 24-year low after last week’s collapse of IndyMac Bancorp Inc. spurred speculation that regional banks are short of capital. The companies said they’ve seen no unusual depositor activity. Fannie Mae and Freddie Mac erased an earlier rally fueled by Treasury Secretary Henry Paulson’s plan to help rescue the largest U.S. mortgage lenders. Alcoa Inc. jumped, limiting the Dow Jones Industrial Average’s drop, after Goldman Sachs Group Inc. advised buying the shares.”

Unfortunately, in the markets, perception and NOT truth is everything.

If people perceive banks are falling like a house of cards, they will. “Self-fulfilling prophecy” comes directly to mind.

There’s a significant amount of grave concern about the banking sector,” said T.J. Marta, a fixed-income strategist at RBC Capital Markets in New York, the investment-banking arm of Canada’s biggest lender. “Now what we’re having is solvency concerns.”

Self-fulfilling prophecy? More:

July 14 (Bloomberg) — The U.S. Treasury Department’s plan to shore up FannieMae and Freddie Mac is an “unmitigated disaster” and the largest U.S. mortgage lenders are “basically insolvent,” according to investor Jim Rogers.

Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson‘s request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview. Rogers is betting that Fannie Mae shares will keep tumbling.

Self-fulfilling prophecy? More:

PASADENA, California (Reuters) – Hundreds of worried IndyMac Bancorp Inc customers descended on the company’s branches on Monday to withdraw their money, after regulators seized what was once one of the largest mortgage lenders in the United States.

Regulators took over the Pasadena-based lender on Friday after a bank run in which customers — panicked over IndyMac’s survival prospects — withdrew $1.3 billion over 11 business days, regulators said.

We are on the potential cusp of a remarkable crash, not unlike 1929. And should this occur, it won’t be because of reality — it will be because of perception. In my opinion, this isn’t anything we cannot resolve — unless we choose not to.

On the other hand, when I write that now might be a great time to buy ammunition, do you wager I am kidding?
BZ
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10 thoughts on “Self-Fulfilling Prophecy?”

  1. Either self-fulfilling or not this is a bad deal no matter, the stupid government bailing out bad, poorly managed businesses,is just plain stupid. here’s a situation that should have never happened. bailing out failed businesses is NOT going to inspire any confidence at all on wall st. sorry, that is nothing but yet another huge waste of taxpayer money that will not give the desired effect. investors are not going to invest in bad business. regulators should have slapped the hands years ago, when all these lenders were lending money, sub prime, no less, to high risk customers. where is this going to end? this government bailing out bad business? should taxpayers bail out all bad investments everywhere, in every circumstance? every failed restaurant, every failed bank, should there be NO incentive to conduct business responsibly? do whatever, the government will bail you out whenever you f–k up?
    the US is going down, and it’s due to lack of interest, that’s right folks, sheer apathy. nobody gives a rats ass about anything here. no moral judgment in anything, business, teaching, no respect for families, children are used like cheap furniture, and even worse, and somehow government is supposed to be our savior. just why should investors NOT run on US markets? just WHY should investors NOT be REAL concerned about their investments? any ideas?

  2. I am trying to put my head in the sand on this one. There isn’t much we can do to prepare at this point. Other than, as you suggested, arming ourselves. So I am hoping a crash doesn’t happen and I will hold my breath and hope this storm passes.

  3. you’re FAR more optimistic than I am, but I will say I ‘credit’ MOST of this horrible economy to the leftwing media.
    For MONTHS now, we’ve heard how well things are doing..
    “….BUT..” it’s that BUT they have to include that killed confidence.
    I’m simplistic here, I know, but when I’d listen to radio comments like the above and right away think “Wow, that’s not a healthy attitude….why the negativity when the story was a GOOD ONE?” you KNOW something was up.

    Some say they’ve been doing this to show we can’t have another Republican in the WH, but they’re risking a slump we might never recover from. Just for an election of a liberal.

    No surprise, huh? He’ll just seal the deal on ruining America for the final time, anyway.

  4. Congress has been under Demorat control for the past 2 years. Prior to that where was the economy? self fulfilling prophecy indeed.

    We talked about an economic collapse if the Dems took over both houses. They did and rather than working to solve some problems they wasted time on “impeachment” “Ending the unjust war in Iraq” and “Protecting the environment” all of those smoke screen issues allowed the economy to creep up and bite us.

  5. The difference between the 1927-33 market loss and today? The government is in charge of this one with its involvement in backing mortgages.

    Hey! Good going!

    At least by 1937 the upturn had already happened. And is now cited as being *slowed* by government intervention and regulation, to the point of causing the recession of 1937-39. This time it will be so much better with government leading the way down… oh, and we are still paying off the S&L problem as that was put into the federal debt structure.

    Can we find a President who will seek to get this privatized?

    Please?

    You know, the small government deal? Just say ‘NO’ to federal involvement?

    Because this time the government is the *source* of the problem.

  6. All excellent points. For the first time in a LONG time, I am precisely unsure of where we are going as a nation. I used to have a fairly good grasp of what I believed would be our path, and I was proven generally correct. But now? I really have no idea; I can make arguments for soldiering on, and arguments for another Times of ’29. And yes, it took MORE than 10 years to recover. . .

    BZ

  8. “arguments for another Times of ’29. And yes, it took MORE than 10 years to recover”

    And the recovery was due to our ability to make and sell goods (mostly military) overseas. The New Deal was responsible for the recession of 37-39.What truely lifted us out of the recession was the war.

    BZ
    I agree with you that the direction the country is unclear but it sure looks like nowhere good.

    I cannot understand why people were standing in line to remove cash from accounts that are guaranteed to $100k. If they no longer trust the bank go to one they trust and open an account and have them move it electronically.

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