What the Pros Say: Look Out for More Gloom
Uncertainty and volatility are two key words for markets these days as more gloom lies ahead. The banking industry and hedge funds are likely to continue to suffer, and investors should be extra-cautious with their money, market pros told CNBC Tuesday. Find their comments below:
"Nobody knows what these current regulations mean. Nobody knows what it's going to mean for hedge funds going forward, where investors should be putting their money, when the cycle's going to end," Aoifinn Devitt, principal at Clontarf Capital.
Finding a Safe Haven in Oil
The price action in oil moderated today. Just the same, you clearly want to own oil, says Joe Terranova, chief alternatives strategist with Phoenix Investment Partners. Additionally, about 80 percent of Gulf oil production is still offline. If that doesn't change, he adds, it could be bullish for the refiners, long term.
End of the World, As We Know It?
“If this plan fails, it’s the Stone Age,” CNBC’s Jim Cramer told Erin Burnett during Street Signs. The good news: If this plan turns out to be a big success, Cramer adds, the market will go up… a lot.
Doubts on Bailout Success
"People rely on the people in Congress, at the Fed, at the Treasury, people that brought us into this trouble, to take us out of trouble. I don't think they will succeed," Marc Faber, managing director of Marc Faber Limited.
"So I think that A.) the financial markets will not recover and we became oversold 10 days ago. We can have recovery rallies but a new high on the S&P is practically out of the question for a very long time. In real terms, equities are still very high and economically, I think the world will go into a slump."
The U.S. government should not be taking on toxic assets from the banks, said Uwe Parpart, chief economist and strategist for Asia at Cantor Fitzgerald when explaining why the bailout plan will not fixing the problem in the financial markets.
"It's not going to solve all the problems that the financials face," Andy Lynch, fund manager from Schroders, told CNBC, adding that the price for toxic assets could be set at distressed levels because weaker banks will be under greater pressure to get rid of them than banks with stronger balance sheets.
The Bailout Price Is Crucial
Not only will the effectiveness of the bailout package be eagerly anticipated, but so will its price, according to Fredrik Nerbrand, head of global strategy at HSBC Private Bank.
If the U.S. government prices the assets they are taking over too cheaply, deflation will remain in the markets and a recession would loom on the horizon. If the assets are overpriced, we will have inflation which would lead to a resurgence in the markets, Nerbrand added.
Politics Scares Markets
"When the package was announced last week, there was certainly bipartisanism and now all of a sudden, we are beginning to see the Democrats wanting to add other amendments to the bill, and so I think that's got the market quite worried. I also believe there's fear out there perhaps we might not get some resolution on this by the end of the week, so that has really caused the market to have some second thoughts and, of course, we saw the market respond in a very negative way yesterday," Peter Cardillo, chief market economist at Avalon Partners said.
"Once we get this bill passed, we should begin to get some confidence back, especially in the credit markets. And once that happens, obviously, we going to have to assess economic activity going forward."
US Financial Overhaul Required
The U.S. needs to move to a unified regulatory framework model like the UK's FSA, according to Uwe Parpart, chief economist and strategist for Asia at Cantor Fitzgerald.
Slippery Slope of Recession
If the U.S. slips into a prolonged recession, even the booming economies like China won't be able to prevent Asian economies from slowing, said Vishnu Varathan, regional economist at Forecast.
The Only Option Left?
The U.S. bailout plan is probably the only option left to save the ailing U.S. financial market, noted Stuart Bennett, senior European economist at Calyon.
Silver Lining: Direction is Good
"However this package comes out, however Congress deals with it, or not, directionally, things are moving in the right direction, Sir Martin Sorrell, CEO of WPP said Tuesday.
"I think we may well be seeing the beginning of the end. I still hold to the view that financial markets will start to recover in the middle of next year and that the real world will pick up into 2010. 2009 will be a difficult year."
We might be starting to see a new phase of the financial crisis following the proposed U.S. bailout plan, observes Geoff Lewis, head of investment services at JF Asset Management.
Confidence Will Return
The return in confidence is going to be just as sharp as the fall in confidence has been, Sir Martin Sorrell, CEO of WPP, told "Squawk Box Europe."