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Author: Subject: Negative Feedback Loops- For those finance folks or anyone else really

Maximum Peach





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  posted on 2/24/2009 at 04:20 PM
I work in finance, not as an investment professional, but as a marketer and client service person (no comments about servicing clients please). While I don't follow markets as closely, and certainly don't have as much knowledge as investment pros, or even most folks around here, my keen eye for the obvious has picked up this horrendous negative feedback loop. Perhaps I am tuned into it more as I work at a fixed income mortgage specialty shop...yeah its been so much fun since 2007, and because I also get shot a lot being the messenger on the client service front.

It just seems every piece of news is negative and creates almost a self fulfilling prophecy. Let me be clear, I do think the news is negative and there are bad things happening...not arguing that point, but I don't see the use in focusing on the negative all the time. For example, housing...home prices fall>defaults rise>foreclosures increase>housing supply increased>pushing down home prices even further. Home prices fall>defaults rise>so lenders tighten credit for new loans>increasing defaults further>pushing down prices even more!! AGHHHH, the negative feedback loop!!

Anyone else who works in finance (or anywhere else for that matter) feel this for the past 2.5 years? I don't really see any end in sight. Although, I think more realistic and positive comments like we saw today out of Bernanke would do some to restore confidence. Do you think that policy efforts out of the government will be enough to restore confidence and break the loop, or is there anything else that can be done in your opinion to break the loop outside of policy? Quite frankly, I don't know. I feel shell shocked. The one thing I would like to see is more of a positive tone coming from Washington, or out of the Federal Reserve. I think Obama did a great job during the campaign of sending the message of "yes we can". I think he needs to be more of the cheerleader again. We need more "yes we can" and less "catastrophe". In all fairness to him, I think when they finally let him under the teepee, he probably went HOLY CRRRRAP, maybe we can't!!! ;-)

 
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Zen Peach



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  posted on 2/26/2009 at 12:59 PM

 

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Ultimate Peach



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  posted on 2/26/2009 at 01:34 PM
It's certainly not as simple as "go to the mall and spend" but consumer confidence is a big factor. IMO though, the bad news isn't finished. The coming storm is rising bad loans, consumer and commercial, that are going to hamper even the healthy and conservative banks.

Here in New England, Citizens has a reputation for being just that, yet today they announced a $929 million loss for the year caused by mounting problems in its loan portfolio. I stress, this is a bank we in the industry consider to be one the MOST conservative - these losses, I would guess, are due to the economy not loose underwriting.

Jim, I'm sorry to crap all over your thread with more bad news, because I agree with your general premise, the recovery has to start with hope, but where is the good news?

Greg

http://www.boston.com/business/articles/2009/02/26/citizens_loses_929m_as_b ad_loans_proliferate/

 

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