http://www.nytimes.com/aponline/2010/01/07/business/AP-US-Economy.html?_r=1 Strange this is spun into good news. The number of initial unemployment claims rose, continuing claims dropped because of people exhausting their benefits, and emergency unemployment claims reach another all time high.
There is no bad news in a bull market.
But better than consensus! Buy!!!
U-6 is over 17%… doesn’t matter how you spin that - it is not a positive
That’s not as important when rates are at 0%. Free money for institutions to go into risky assets, including equities. Just look how well the trading divisions are doing.
so you have easy money to drive up the price of assets without any fundamental backing… thats called a bubble
you got to be crazy to short this market, Fed not hiking the rates anytime in 2010…don’t listen to the regional Fed presidents talking about “exit strategies”, more stimulus coming, election year, free Fed money^, there is no reason why the market can’t go up another 20-30% from here. yes maybe low quality, high beta, junk rally is over but equities still have some fuel in the tank.
or maybe the move on the downside in 2008 was based on the belief of Great Depression II (more fear than fundamentals), and prices are going back to “fair value”.
former trader Wrote: ------------------------------------------------------- > or maybe the move on the downside in 2008 was > based on the belief of Great Depression II (more > fear than fundamentals), and prices are going back > to “fair value”. right on. the world is not ending. i don’t know what the fair value is but we are nowhere close to GD II. but they must solve this housing mess asap. huge drag on the economy and the banks.
You sure about that??? I don’t know that we are out of the woods yet. I’m not saying GD II is upon us, but I wouldn’t dismiss it too readily. Banks are still sitting on a bunch of crappy assets and have yet to write them down. The Fed or treasury may end up purchasing them all and basically inflating the money supply / devaluing the currency to do that, but that will push up interest rates and slow business investment. More likely, banks will hold on as long as they can. Now we have a bunch of mortgage resents coming down the pike. These are resets for people who already had suboptimal credit and the unemployment rate is somewhere between 10% (official) and 17% (official + underemployed + discouraged). The good news is that a financial meltdown is no longer “unthinkable” and the folks at Fed and Treasury have probably had some time to think about what they would do differently the next time around and we wont be *quite* as much like drunks stumbling in the dark if banks start to crack again. The bad news is that we likely won’t have any more dry powder to inject into the system without something radical. As a result, if the mortgage resets do start freezing up banks again, we may end up not providing any liquidity not because we choose that, but because we can’t anymore. That would take us to GD II. I’m not saying this is going to happen, but I am saying that it is foolish not to include this in your scenario planning. Personally, I think if banks start to freeze up again, I think we will need to nationalize the failing banks, and this might not be a bad thing. It’s one thing to nationalize banks because you have an ideology that says that all banks ought to be run by the government (I think that is a bad idea); it is another thing to say that banks need to be nationalized at a particular moment in time because the government is the only agent capable of providing sufficient capital. Eventually banks would need to be re-privatized after the crisis, but in the meantime government could make sure the capital goes to things like lending to solvent businesses rather than paying large executive bonuses.
Rosenberg went off the deep end with his afternoon note on Today’s numbers.
Always insightful bchadwick, thanks. Here’s my take: There were reasons why US had a Great Depression. Basically monetary and fiscal authorities, and the administration got it all wrong. This is not the case today. I don’t dispute the fact that we will see the side effects of the current policies of the Fed and the treasury, meaning higher inflation and increasing interest rates. But inflation or deflation? which one would you pick? Higher interest rates? Yes. New Normal? Yes. Sluggish recovery? Yes. (very) Slow job growth? No doubt. But those are not the recipe for GD II. They set the rules of the game by announcing no Lehman like BK and QE in march. All pro-rally. It was 4 months and 40% later for most investors (including me) to accept the reality. Now the market is up 60% and, interestingly, some people still waiting for THE day. Mr. Market is just making higher lows since then. I don’t know about you but I am not fighting the FED anymore. I agree with your analysis on banks. However, the government had the opportunity to clean up the banking mess in early 2009 and they missed it badly. I don’t think nationalization can be done in US as you imagine. I also think it was a mistake for the banks to bay back TARP monies. Govt should’ve said no. Bank executives couldn’t take political and financial pressure. They will need that capital at some point. I don’t think anybody seriously dismisses a Depression scenario, but it’s not in the picture at this time. Putting too much weight on it just keeps you out of the market.