While Hank Paulson is hoping that the US congress will pass into law his plans for a $700bn bailout of the US banking system, we have news that US new-home sales in August slumped 11.5 per cent to a 460,000 annual pace.
My guess is that until the US housing market pulls out of its dive there will be no lasting recovery in share prices, maybe anywhere in the world let alone on Wall Street.
There is a recent history of false dawns on Wall Street. Bear Stearns is rescued by JPMorgan Chase, shares rally; Fannie Mae and Freddie Mac are effectively nationalised, shares rally and now Hank Paulson proposes a $700bn plan to buy all the toxic debt, shares rally. The other rallies didn't last; I don't expect this one will either, though I would be delighted to be proved wrong and for this to be third time lucky.
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