Folks, let's make up our minds. The New York Times was so excited about Monday's 413 rise in the Dow that it declared a "re-emergence of trust" in the credit markets on the front page Tuesday. Alas, two section within, Times M&A maven Andrew Ross Sorkin was gloomily shaking his head at how slow the credit markets were to respond to a massive infusion of equity stakes, bailout funds and oceanic central bank liquidity. The headline on Sorkin's column: "One Day Does Not Constitute a Trend."
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It's always interesting to observe the Times critiquing itself in public. While the reality probably lies between the two poles, I would, being a pessimistic soul, tend to side with Sorkin on the glass half full, half empty debate. We've seen rallies before, only to be disappointed. And given the mind-bending volatilities out there -- wasn't it swell of the Times to explain the volatility index Monday to us all? -- declaring victory is probably not a good idea.
Now part of Sorkin's argument is based on the notion that after Treasury Secretary Henry Paulson shook the lapels of every big banker around, they would all rush out and start tossing money out the door. Instead they stuffed it into the mattresses. Well, it's unrealistic to expect instant results. The system is complex, but that also doesn't mean it won't happen. Give it time. Of course, it might have been wise for someone at Treasury to say that publicly when the equity stakes were made; but then Treasury has not shown a penchant for managing expectations.
The reality of what we all face is that trust can come and go, just as stocks will rise and fall. There are many shocks still to be absorbed: hedge funds, emerging markets, continued bank write-downs as they unload the toxic stuff, the manifold effects of recession including more defaults. Deleveraging is hard and nasty. There are all the things we don't yet know. There are the unintended consequences. There are the screw-ups. Will we come through this? Undoubtedly. Just not today. Oh, by midmorning, the Dow was down nearly 200 points. Cancel the party. - Robert Teitelman
See Sorkin story from The New York Times
See cover story from The New York Times
Robert Teitelman is the editor in chief of The Deal.
