You know that stock markets and the economy are in trouble when the otherwise dour passport officials at Heathrow airport sympathize with your “investment manager” occupation. “We feel so sorry for you,” said the uniformed lady who usually asks trick questions. “But don’t worry, we’re al suffering.” I guess we are.

The US Congress on Friday passed the government’s $700 billion bank rescue plan, giving the Treasury secretary extraordinary powers to buy toxic mortgage securities from financial institutions.

Somebody remarked that the problem with financial institution balance sheets was that “on the left-hand side nothing is right and on the right-hand side nothing is left”.

And, after all, what will $700 billion buy? As shown by

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In what is being termed a strategic alliance by Morgan Stanley (MS), Mitsubishi UFJ (MTU) on Monday 09/22/08, announced that it will purchase a 10-20% stake in Morgan Stanley (MS). Mitsubishi UFJ (MTU) will make the investment after completion of its due diligence and upon the closing, will elect a representative to sit on the Morgan Stanley board.

According  to Morgan Stanley, the investment “in addition to further strengthening the Firm’s capital position, this alliance would benefit Morgan Stanley and MUFG by providing each with a valuable strategic partner as it seeks to enhance its global footprint and capture financial services opportunities around the world.  Morgan Stanley was granted approval yesterday by the U.S. Federal Reserve Board of Governors to become a Federal Bank Holding Company.”

Morgan Stanley’s (MS) stock which closed on Friday 09/19/08 at $27.21, opened at $30.76 on Monday, reached a high of $31.65, but ended up closing at $27.09,

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There is no guarantee that mortgage rates will fall when Dr Alan Bollard cuts interest rates, as expected, on 11 September. This is because of the international credit crunch which has widened the gap between official central bank interest rates and mortgage rates over the past twelve months. When the credit crunch began just over a year ago the US Federal Reserve Board’s official federal funds rate was 5.25% and the one year adjustable mortgage rate was 5.84%. The gap between the two was a mere 0.59 percentage points. The Federal Reserve Board dropped its official rate from 5.25% to 4.75% on 18 September and further cuts were implemented until the current rate of 2.00% was established on 30 April. However mortgage rates have remained stubbornly high and the gap between the official federal funds rate and the one year mortgage rate has risen from 0.59 to 3.29 ...