In the decline from more that 10,000 at the end of 2007, more than half the value of the NYSE has been wiped out, leading to a massive decline in consumption, production, employment, savings, investment, and tax revenues.
The nation and the world will suffer from this debacle for years.
MONEY SUPPLY
Except for a short blunder in early 2009, the Federal reserve has performed magnificently, lending on troubled assets, neutralizing monetary injections when needed, and finally pouring high-powered money into the system when it was justified.
The latest program to add primary reserves to the system leads Paterson to conclude the recession is over. The temporary blunder of allowing the base to fall caused the final spike down in stock prices and convinced the Fed that money easing is the right policy.
CREDIT SPREADS
As Fed policy takes hold, and banks continue lending, credit spreads continue to tighten.
Paterson concludes the worst of the credit crunch is over, and lenders can resume longer-term lending.
TACTICS
Money market arbitrage should continue to take advantage of the wide spreads between bank issued paper and other assets.
Longer term lending can also continue, with careful attention to credit quality.
STRATEGY
The Portfolio Risk Management Team should plan some vacations to get away from the office and the grinding pressure of interest rate and credit risk.
Report success to senior management, and encourage a visit from Paterson to explain why it's time to take a breather.
FINAL NOTE
Thanks to those of you who have sent word of thanks and appreciation.
Paterson will be traveling to your town in the next few months, so please plan to spend some time reliving this debacle and our successful performance.
