NoFate

The Media Has Mistaken a Major Re-allocation for a Recession

What we have is a sucker rally ...it should go for a while, then we plunge again. My responses to the points in this article below.

1. The enforcement of SEC rules against naked short selling will provide stability for the financials.
- Didn't help China much did it? I think it will smooth out the race to the bottom though.

2. Non-financial earnings results to exceed lowered expectations.
- Energy, sure. The others had their expectations lowered about a week ago. We have been in an earnigns recession for a year now with no indication of a turn around.

3. Probable 2% GDP growth announced for 2nd quarter.
- Maybe, because of the stimulus checks ...if you can even believe the government statistics. There will not be the huge growth expected in the 2nd half everyone was predicting though.

4. Evidence of a significant decline in oil demand.
- Oil demand declines when emerging market growth slows down. Think this is a good thing for stocks?

5. Booming exports.
- Somewhat, but this is because the US$ is weak. The exports do not come close to making up for the food and energy price increases.

6. Low stock valuation.
- Huh? The PEs on the S&P are still over 20. The historical norm is around 15 I think and we are overdue for a mean reversion. Oh that's right ...it's different this time!

7. Low interest rates, low taxes, and an additional stimulus package on the way.
- Hmmmm, maybe liquidity trap, reduced government revenues and increased government deficits. Sound like fun?

Anyway, banks have 100s of billions of additional unknown write-downs since they can't even predict how many more foreclosures there will be or how far down home prices will go. Banks margins are going to continue to be stretched. The Fed is damn near out of bullets. The consumer is in debt up to their eyeballs. Unemployment is rising, profits are declining, etc...

Anyway ...SOLD TO YOU!