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More signs of the bottom behind us

We are now over 28% above the March 9 bottom in the S&P, one of the best run ups since the depression. A bear rally? Maybe, but obviously, all data appears in hindsight, and only when that bottom is well behind us and we are obviously in a growth cycle, will it be clear. On one hand, Lawrence Summers declared the free fall is likely to end in the next few months, but Thomas Lee chief US equity strategist at JP Morgan Chase is predicting an 8 to 10 percent drop from here.
Rates on 30 year mortgages have dropped to a record low 4.61% and it appears that credit is starting to free up. Freddie Mac and Fannie Mae securitized nearly $145B in mortgages in February, a $1.7T annual run rate. That kind of money has to have an impact on the funk we are in. I remain cautious, myself, but guardedly optimistic.


  • Augustine April 11, 2009, 10:23 am

    IMHO, you’re jumping the gun too early. It’s been a mere month, but the economic performance does not match it: unemployment is creeping up relentlessly, profits, if any, are depressed, stores closing are ubiquitous, etc.

    It is likely to be a bear rally because it has no fundamental sustainability. It’ll probably come crashing down. As I pointed out before (see http://dshort.com/charts/bears-nominal-real.html?four-bears), such rallies are not uncommon. And, lo and behold, at about the same time through the depression of ’29, there was a similar, though not as sharp, rally, only to crash again.

    I’d be glad to be proven wrong, but only time will tell. In the mean time, I’m happy to ride the surge, though keeping a close eye if I need to go to bonds.

  • Augustine April 11, 2009, 11:14 am

    If I may again, I believe that the recent manipulation of accounting rules in order to make banks more appealing than they actually are, is going to trigger the next downturn.

    Government fiat by changing bureaucratic rules is hindering the market to evaluate the banks’ assets. When they are evaluated when they are liquidated, the trust crisis will be much more severe and, as usual, will overshoot. Check this interview out: http://www.cnbc.com/id/30073339

    It’s not time to pop the champagne yet, but to brace ourselves for the worst.

    Happy Easter.

  • Elle September 18, 2009, 1:10 pm

    Today I started considering some stock and ETF purchases. For stocks one fundamental I always examine is Debt/Equity. The original value investor guru, Benjamin Graham, prescribed inter alia that Debt/Equity be less than one. At finance.yahoo.com for any given stock, Debt/Equity appears under “Key Statistics.” Consistently with stocks in a variety of sectors, it comes up as “N/A.” A few years ago this was not the case. What is going on? Companies have no equity these days because… ? I am not talking about banks here. I am talking about KO, UTX, VZ, etc.

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