Regarding the dire outlook due to this financial crisis:

[HognotinMemphis]

Economic weakness has been isolated in the housing market or financials exposed to it, and in sectors affected by energy (airlines and autos). The weaknesses in these areas have not dragged down overall GDP. Real GDP grew at a 2.8% annual rate in the second quarter and is up 2.1% in the past year. Excluding home construction, real GDP has grown 3.1%.

However, panic is spreading. Forget job security...normally positive and optimistic people are now worried that they will lose their money. President Bush said that that if the Treasury Plan was not passed very bad things could happen. He said, "banks could fail, including some in your community," further stock market declines could "reduce the value of your retirement account," "the value of your home could plummet," and "millions of Americans could lose their jobs." From a President, these kinds of statements are unprecedented. The only parallels were 1977 and 1979 national TV addresses by Jimmy Carter, talking about energy and a crisis in confidence. Like then, much of our current economic crisis has been caused by government failure, even though conventional wisdom is blaming market failure.

The isolated storms in housing, finance and energy, are now being exaggerated by excessive government intervention (on a knee-jerk basis), mark-to-market accounting and panicky words from political leaders.
As a result, consumers are pulling back, credit is being squeezed even to solid, well-run businesses and the
economy is being threatened by this spreading panic. If the economy fell into recession because of this it
would be an unprecedented event. Consumer psychology has never caused a recession...never!

Productivity is still booming, and so are exports, the Fed is exceedingly accommodative and tax rates have
not been hiked. Oil prices are below $100 per barrel. Finally, all it would take to fix financial market problems today is a temporary suspension of mark-to-market accounting for a targeted set of illiquid assets.  In other words, any economic problems that the US faces in the next few months or quarters is temporary.

Financial markets have priced in Armageddon, and as a result still present one of the greatest buying opportunities of our lifetimes.

[Biggus Piggus]

Good [CENSORED] god mark, it's not panicky words from the president, it's the wholesale destruction of entire major banks and all of the traditional institutions on Wall Street.  That's all.  People panicked because money market funds were breaking the buck, at a time when money market funds had more cash than they'd ever held in the history of the world.  Because they're safe right?  Look at some [CENSORED] stock charts, man.

[Biggus Piggus]

Economic weakness has been isolated in the housing market or financials exposed to it, and in sectors affected by energy (airlines and autos). The weaknesses in these areas have not dragged down overall GDP. Real GDP grew at a 2.8% annual rate in the second quarter and is up 2.1% in the past year. Excluding home construction, real GDP has grown 3.1%.

Real GDP "grew" ONLY because of a statistical aberration in the calculation of the GDP deflator, which went DOWN when real inflation went UP solely because oil prices (mostly imported) spiked at an abnormal rate.

I've already dissected this Q2 GDP on this board, and in reality it was negative.  In reality, Q4 of last year was negative.  Employment has been negative since last year.  It's going to get a lot more negative.  September won't show the extent of the pain, and lucky for the Republicans that October jobs won't be reported until after Election Tuesday.

[HognotinMemphis]

Good Franking god mark, it's not panicky words from the president, it's the wholesale destruction of entire major banks and all of the traditional institutions on Wall Street.  That's all.  People panicked because money market funds were breaking the buck, at a time when money market funds had more cash than they'd ever held in the history of the world.  Because they're safe right?  Look at some Franking stock charts, man.

MMF's broke the buck due to panic. Wachovia failed due to panic...depositors taking their money out of it.
The failed investment and commercial banks needed to fold...if you want to stay around, don't leverage yourself at 50 to 1 or buy investments you don't have a clue about as to their backing, you [CENSORED] idiots.

[Biggus Piggus]

MMF's broke the buck due to panic. Wachovia failed due to panic...depositors taking their money out of it.
The failed investment and commercial banks needed to fold...if you want to stay around, don't leverage yourself at 50 to 1 or buy investments you don't have a clue about as to their backing, you Franking idiots.

Part of it was withdrawals, but the first one to break the buck did so because their investments cracked.

[Niels Boar]

If the economy fell into recession because of this it
would be an unprecedented event. Consumer psychology has never caused a recession...never!

Then why do economists bother to measure consumer confidence?

[Biggus Piggus]

We are IN a recession, better catch up.

[BlackKnightHogFan]

I've got plenty of charts and pretty graphs showing the relationship in consumer confidence lows and market lows and vice verse.  As of today consumer confidence has been coming off a bottom four months ago.  Might be the chicken and egg argument.  However, I don't believe this "situation" can be oversimplified into HIM's post above.  If you are privy to the goings on in the credit markets and are paying attention to the spreads, then you know how serious this has been and will continue to be.  Just because the equity markets rallied today, doesn't mean this is over.  If nothing is done the credit markets will seize and that will have severe impact on main street.  Unfortunately, it may take a company missing payroll or laying off thousands of employees for this issue to become real to the average American.

[Biggus Piggus]

Today's rally was a combination of

1) some optimism that a bailout is still on the table
2) quarter-end window-dressing (which is forbidden in our shop, we couldn't trade yesterday either).

We will get a better look at reality tomorrow.  Meanwhile, the TED spread isn't fooled by any of this.

[BlackKnightHogFan]

Today's rally was a combination of

1) some optimism that a bailout is still on the table
2) quarter-end window-dressing (which is forbidden in our shop, we couldn't trade yesterday either).

We will get a better look at reality tomorrow.  Meanwhile, the TED spread isn't fooled by any of this.

As I said, the credit markets tell the real story.  Until that has some measurable affect on main street, they will continue to whitewash this.

[HognotinMemphis]

Economic weakness has been isolated in the housing market or financials exposed to it, and in sectors affected by energy (airlines and autos). The weaknesses in these areas have not dragged down overall GDP. Real GDP grew at a 2.8% annual rate in the second quarter and is up 2.1% in the past year. Excluding home construction, real GDP has grown 3.1%.

However, panic is spreading. Forget job security...normally positive and optimistic people are now worried that they will lose their money. President Bush said that that if the Treasury Plan was not passed very bad things could happen. He said, "banks could fail, including some in your community," further stock market declines could "reduce the value of your retirement account," "the value of your home could plummet," and "millions of Americans could lose their jobs." From a President, these kinds of statements are unprecedented. The only parallels were 1977 and 1979 national TV addresses by Jimmy Carter, talking about energy and a crisis in confidence. Like then, much of our current economic crisis has been caused by government failure, even though conventional wisdom is blaming market failure.

The isolated storms in housing, finance and energy, are now being exaggerated by excessive government intervention (on a knee-jerk basis), mark-to-market accounting and panicky words from political leaders.
As a result, consumers are pulling back, credit is being squeezed even to solid, well-run businesses and the
economy is being threatened by this spreading panic. If the economy fell into recession because of this it
would be an unprecedented event. Consumer psychology has never caused a recession...never!

Productivity is still booming, and so are exports, the Fed is exceedingly accommodative and tax rates have
not been hiked. Oil prices are below $100 per barrel. Finally, all it would take to fix financial market problems today is a temporary suspension of mark-to-market accounting for a targeted set of illiquid assets.  In other words, any economic problems that the US faces in the next few months or quarters is temporary.

Financial markets have priced in Armageddon, and as a result still present one of the greatest buying opportunities of our lifetimes.

This was pretty much dead on. If you invested in equites from Oct 1, 2008 through the following April, you made a huge return on investment, assuming you did not sell for short term gain.