March 23, 2009: 2nd biggest rally outside of 1938
It would be interesting to hear some commentary from some of you forum posters out there in regards to the huge rally taking place in the market.
Geither’s plan could actually save the banks (at the taxpayer’s expense).
Here are a few interesting links if you haven’t already read them:
Since there’s a lot of "doomsday" talk that goes on at this forum it would be interesting to hear some other takes on this. I think that it’s important to stay objective and keep things in perspective. It’s difficult to assess during our current volatile times which events will be historical turning points or not since there are elements of both hype and panic out there.
My take is the same thing happens when you jump off a bridge tied to a bunjee cord. I’m just waiting for the right indicators to short the heck out of this thing when it heads south again.
Even the so-called "doomsday" folks have been predicting a bear market rally this spring, based on technical analysis alone. The question is, will the rally last?
I don’t have a crystal ball, but I feel pretty certain the answer is "no".
The fundamentals haven’t changed. If anything, they’re getting worse by the hour.
One piece of marginally good news (better than expected home sale data) and we get one of the biggest rallies in history. People are desperate. They want to believe the worst is over. They want things to get better. And they’ll latch onto any piece of news that might support that hope – whether it really does or not.
Even relatively mainstream economists like Krugman and Galbraith are trashing Geithner’s plan. Mish wrote an excellent critique of it (that you linked to), and I’m sure we’ll be seeing something from Chris, too. It doesn’t take a genius to figure out why it’s a confidence game. They’re putting taxpayers on the hook for 93% of the toxic bank assets. Spending over $1 trillion that we don’t have. All based on the belief that the only way we can recover is to get back to lending and spending as fast as possible.
It’s a sick joke. Unfortunately, it’s on us.
Does inflation or the threat of inflation have anything to do with the bounce? Or is this just a suckers rally?
I am also keeping an eye on oil which is now around $55.
My take on the rally – the US govt has said they will support risk-free speculation with a trillion dollar backstop, banks won’t have to report losses and can foist their bad paper onto the taxpayers – so what’s not to like?
I wouldn’t think that it would be related to inflation. A big spike like that has to have an emotional element to it. Perhaps even a panic to it.
Maybe the investors are thinking "…they’rer going to subsidise the failed banks with taxpayer’s money, we can make a profit…" or maybe some are short-sellers, or perhaps like a post above said, they’re so starved for any good news that they just jumped aboard, caught up in the moment. There has to me a mass psychology to an event like this.
Monday’s rally was on lighter volume than Friday’s activity. Granted, Friday was options expiration, but lighter volume on a huge up day does not give ya warm fuzzies that buyers were knocking down the doors to get in…
From a trader’s view – the easiest bet is to remain nimble and trade in the direction that the market is going. From a longer-term view, one typically sees a bull market as having increasing earnings coupled with declining unemployment, interest rates, & inflation…which doesn’t quite sound like our current environment.