Talk Elections

2009, while the Stock Markets and Unemployment Rate have gotten much, much worse, consumer confidence appears to be on the rise in January and February.  American consumers aren't holding back quite as much as they were in late 2008.  Although it must be remembered that two months doesn't mark a trend, it does say something.  Is it possible that we may be seeing light, however dim it may be, at the end of this long, dark tunnel?

It depends who you ask. The good news is that the banks finally seem to be out of the dark, for now, with Citi announcing this week that they do not need more federal money and that they would make a profit this quarter. Bank of America announced they need no more federal money either and will be profitable for the year. Both of these signal a market rally for now.

Are we out of the woods? No, but even Obama admitted today the crisis isn't as bad as we once thought. If the financials can get turned around, we could recover faster than we thought.

They did push the "recovery date" back to October, instead of August, but I agree with you.  If the banks continue to improve and the credit crunch is straightened out then the foreclosure rate should slow and we'll be on our way back up here within the next six months.

Well, I'm going to try to make as much money as I can off this rally, whether it be a bear market or sustained one. For the first time in a while, we are finally getting a stream of good news coming from the banks. Reserves are up 20% in some cases. They are not in as dire straits as many of us thought.

A lot of this now lies on the Obama Administration's handling of the situation. If they take the right side on market to market and the uptick rule, this thing could sore for the next few months. If they choose to continue to beat the depression drum and scare the public to push through their agenda, then we will be back down in the 6000s or worse. I liked that he admitted we weren't in as bad of shape as we thought. It's a good start. 

With the macros the way they are (and I'm not really speaking about government-released numbers), the chances that SP 500 @ 666 is the bottom is highly, highly remote in my mind (though it cannot be wholly dismissed - nothing can).

There should be a bear market run for a while at some point (maybe the point is now).  And even though I said it should reach SP 500 @ 850-900 or possibly even 1000, I would advise to at least start to convert to cash if and when we pass SP 500 @ 800, because I can't even guarantee those levels.  Of course, if you would have listened to me, you would have converted at the beginning of the year, natch. 

Two other things:

1) If you believe anything Citi or BoA tells you, I have a bridge to sell you down the street where I live.  Citi and BoA *might* be able to make a profit if we ignored all their Level 3 and off-balance sheet assets (how many hundreds of billions worth of worthless trash?), but I wouldn't bet on it.

In fact, it's another *tell* in my mind that we are nowhere near the bottom when people still believe what these financials CEOs tell them after being burned how many times now.  Pump, pump, pump, pump and then dump, folks...

It's only when people completely disregard, or acknowedge them as complete liars, anything these guys tell us that we might actually reach a bottom.

2) Reinstatement of the uptick rule would mean nothing because it hasn't had any impact since stocks went to penny movements instead of fractions.  Crashes come when people refuse to buy, not because you have to short at a higher number.

My guess is that mark-to-market will be removed.  Two scenarios can happen then - 1) Buy the rumor, sell the news (market jumps up in anticipation and then crashes when passed); 2) We skyrocket when it occurs.

jmfcst disagrees with me here, but I think removal of MTM is useless and actually makes things worse.  You see - right now financials are hiding all of their complete garbage in Level 3 or off-book.  It allows them to look much better than they are, so in a sense, MTM is already not being followed (since the off-book stuff is not being priced properly).  We know the Level 3/offbook stuff exists and just how bad it is - that's the reason why Citigroup has fallen from $50 to $1.50 - investors are not that stupid.

If you remove MTM, you will entice these financials to price everything to model, thus creating a greater amount of game-playing (a la Enron, which is why we have MTM in the first place), which, after early pumping, will in the end lead to a final ugly, ugly dump (when we figure out we can't trust anything being done). kaboom...

If we're lucky, we will end up with a decade or two of Japanese-like hangover.

Anyone who expects the Dow to go back to five digits in the next 10 years, doesn't get it.

I think the outside possibility of the DOW hitting 5 digits during a major bear market rally still exists, but the narrow window on that is close to closing.

I do agree with you that the Japanese-like hangover option is the best possible result.  There are a lot of *really* bad results out there, some of which scare even me...

I'm overly optimistic when it comes to stuff like economics and politics, so I'm inclide to agree with BushOK.

My only fear is that the light we may be seeing right now isn't hte end of the tunnel, but merely an oncoming train (don't ask me what the train symbolizes in the analogy - I have no clue - my point was merely that it's something bad).

I was gonna do the train thing. Anyway. My answer is not really. Once the effects on the real economy sink in during this year things will turn down, imo.

I don't think so. My guess is that these numbers are being driven by recent reports on consumer spending + the stimulus. As soon as other, more sobering figures are released the market will dive again.. Like it has when confronted with similar news the last few months.

There are mind games that go on in our marketplaces; I see this as a tactic to make the fickle little sh**ts hopeful for a little while and less frightened of spending. Government can play a role here (thus why Bush & Co. were afraid of admitting this was a recession, or worse). Placebos can seem to work just as well as the real thing sometimes. As Mint stated, however, hard data can turn that around.

Actually the whole event is 100% psychological, so a turn-around is certainly possible, manic-depressive style.

The oncoming train is deflation.

Well, what should have been a 5th straight day of gains on the major indicies turned into a paltry 7 point drop for the Dow.  I bet the international stocks drop a bit overnight and the futures point down in the morning.  It probably won't be a major sell-off, but it will probably erase some of the gains we made last week.  I sure hope I'm wrong, though.

In good news, though, my company's stock (NSDQ: OKE) has seen five straight days of gains and is up to 20.45 which is two points off its low early last week.  It was up near 30 points just in late February, but we've seen a major, major sell-off on that stock the two or three weeks prior to last week.

THe charts still have this bear market rally lasting through Memorial Day before we see a major sell off. I bought 1000 shares of Citi at $2.15 and hopefully it will ride the wave of euphoria for a few days so I can make a nice profit. I'm not confident, but I think we will see some sort of bounce. The fundamentals say we should for the time being. Tomorrow we should get news that market to market is going to be eased. A lot of good news is coming out right now that is pushing the market up. The DOW was off today, but BAC and C were up 8% and 30% respectively. If C goes under, I lose about $3,000, but if it goes up to even $6 or $7, then I've made enough to where not having a summer job isn't do bad.

But deflation wouldn't necessarily be a terribly bad thing if it happens slowly.  The U.S. could benefit from the reversal of some of our inflation; of course, if it happens too quickly, that's when  it's bad.

Ask the Japanese how well that went.

()

It wasn't gradual.  Like I said, unless it's slow (and I mean really slow), it's going to hurt.

I've averaged down my Citi stake now and am long on BAC. I think if M2M is eased this week, the stocks should jump up. The charts say we'll be in this bear market bounce till Memorial Day. Play comeback while you can! I'm up 24% this month so far on my portfolio.

I think we're starting to hit rock bottom; I don't think the DOW will fall below 6500 again, staying in the 6500-8000 range for at least the next 12-18 months.  I think it will be at least 3-4 years, though, before we've gotten back to the peak numbers.

Who buys stocks?  Whoever it is, they seem to be all excited today.

I think people are done panicking and are now realizing that they don't have to hold back completely.  I think many are reorganizing their finances, are saving, and finding that they do have a bit left over.

I've noticed an upsurge in sales recently after a dismal January and early February.  Last week, for example, we did 12% higher than last year.. and last year we did 10% over the year before.  Not bad considering that book prices have not increased much at all in the past year.

For the housing market, MASSIVE deflation would be a great thing.

Think about how asset deflation affects other entities (government, retirees, among others) before thinking this is such a great thing.  :)

Though I must admit we are in it - the housing bubble is, at best in my mind, about a little more than halfway through deflating (the shadow inventory is skewing things a bit too, for now).  And it will be a L-shaped recovery, not V or U.

Right. If we go by median housing prices, we are still about halfway to making it back to where we should be. I couldn't believe how expensive housing had become until I saw the charts.

This is for you jmcfst, on the toxic stuff:

http://zerohedge.blogspot.com/2009/03/ridiculous-marks-of-toxic-assets.html

And a chart:

http://2.bp.blogspot.com/_FM71j6-VkNE/Scka7JcKKeI/AAAAAAAABkA/pS34gaIK1jY/s1600-h/toxic+assets.jpg

Keep in mind that a good deal of the problem was also lack of income growth in the lower 90-95% of the population.  Inflating these incomes would be another effective way to 'regain a balance' that would be much less damaging than the heavy deflation caused by the housing decline.

Well, something's gotta give.

Wall Street may be "recovering", but Main Street certainly isn't. The unemployment rate continues to rise, the cost of living keeps getting higher, wages are stagnant, and the rich are getting richer while the poor are getting poorer.

Don't kid yourself; there will not be a TRUE recovery to this recession until we fix the very real and urgent problem of today's stratified class system and its income inequality.

First, a disclaimer.  I'm on the board of a group getting some stimulus money.

The stimulus is a joke; I've seen the job estimates and expect it to be, at best, two-thirds of estimated job creation.  It will also be substantially slower than anticipated.  I expect the negative effects to be seen by September.

The toxic asset program buying is needed and is a long term plus.

The proposed budget partially eliminates two important deductions, charity and mortgage deductions.  It will have an effect of slowing housing sales next year and will kill charities (Sojourner, take note).  2010 looks bleak. 

JJ - the charity deduction partial elimination will simply not occur.  It is dead because the votes will never be there for it.

For that matter, I expect the mortgage deduction partial elimination to face the same fate.

This rally may be over. Bloomberg is reporting that the GDP will be worse than the Street forecasted. It will be -6.6% instead of the expected -6.2%...

Good thing I was out of C today. I'll probably dump BAC tomorrow if I still have a profit at $4... then back to MO for the return of the bear market.

I hope so!  Both are hideous ideas.

Such is the truth. Not since the 1920s have we had so lopsided a boom -- a boom so completely dedicated to the enrichment of the upper 10% of income-getters and to ensuring that those who get the highest incomes have no responsibility toward anyone. The Gini coefficient, a measure of inequality of income,  for most of Europe is somewhere between .25 and .35; for the United States it is around .40. We now have the same sort of economic stratification that Mexico has. Such reflects the economic values of Dubya and his backers.

We had an administration that believed that if the Right People got everything, then miracles would happen for the rest of us. Profits would have to come first, and only those who got the profits or were the best-paid retainers deputized to squeeze and cheat others out of all possibility of happiness  achieved what they deemed necessary, then there would be such prosperity that all questions of equity would become irrelevant.

The capacity for elites to never cease in their rapaciousness amazes me. I have yet to know of a tycoon who has said that he has made enough. The most exploitative elites -- mobsters, swindlers, feudal lords, and corrupt politicians -- never find that they have made enough even though they do great harm and wreck the system whence they derive their lucre.

...Did you know that 20,000 Americans die each year because they can't afford their medicines or medical treatments? That's roughly half the toll from motor vehicle accidents.

Um, no.  The most exploitative elite is simply the elite - the owners.  Rich people.

And they haven't wrecked the system which gives the their privilege yet - the prisons, police, and armies are still functioning just fine.

The world economy is showing signs that it will stabilize and recover in the future-- but if this occurs, and this is a big if, we may run the risk of net capital outflow from the United States, as we saw in the Fed's latest report in January.

Currently, there is capital flight from emerging markets to safety in the United States. This has reversed the decline of the U.S. dollar which had been taking place in 2007 and early 2008, and was the market's way of reacting to the United States current account deficit. There is even capital flight from China, which has for several months in late 2008 and early 2009 negative pressure on its currency, the RMB, despite its record of huge reserves and a huge current account surplus. Now there are signs that emerging market currencies are recovering, and the futures markets are predicting a slight (though still slight) uptick in the RMB in the coming months.

If the world economy stabilizes, emerging markets will have a lower risk premium and there will be capital flight from the U.S. This will make it harder for the U.S. to borrow. The Fed should respond to this situation by quantitative easing. The world community must allow the dollar, the pound and other countries that have traditionally run significant current account deficits to depreciate their currency in an orderly fashion. This could be a one-off or it could be a gradual process. Mass capital flight as a result of psychological panic must be avoided at all costs.

As the dollar and pound depreciate, import costs will rise in the U.S. and U.K., creating inflationary pressures. But exports will also become more competitive. Conversely, in current account surplus countries, exports will become less competitive, and fiscal stimulus measures must be used to increase domestic demand.

The G-20 should help Arab nations such as Egypt, Iraq, Jordan, Syria and Algeria develop their capital markets. This will allow the Arab members of OPEC to invest in productive resources in their own backyards, if the U.S. is unable to continue its role in vendor financing.