Failure!

There's an article from Reuters that says that Treasury Secretary Paulson won't bail out Lehman. I think at this point, the government has to let someone fail. Maybe not too badly, but I think they realize that they've got to let everything drop down a level.

This runs the risk of everything getting out of control, but I think it's out of control already. The Fannie/Freddie bailout stabilized the markets for one day.


There is one other thing we need to throw in the mix: Treasury yields are lower than they were a week ago. Paulson has to like that. It gives him a cushion for all the borrowing the Treasury has been doing with the huge deficit the government is running.


One other thing: WaMu is what's really important, not Lehman. According to recent financial docs, WaMu has $180 billion in deposits, of which $140-150 is FDIC insured. With WaMu in the news the last week, I've gotta believe that any rational person is yanking any funds that aren't insured. That's a lot of deposits for WaMu to lose.


On the other hand, do Paulson and Bernanke know how to do anything else except bailouts?


Nouriel Roubini said on Bloomberg that 50% of world GDP is contracting, which is a spread from only the US six months ago.


So, what we see here is that the fundamentals for commodities are terrible, but everyone seems to be pricing that in right now. If there was anything I'd short right now, I think it would be tech.

In the meantime, I keep liking my bonds more and more.