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Is This Really Just a 'Junk' Rally?

When it is a GDP contraction of 6.1% is good news for stock market? As noted earlier it is a sucker rally. A little uptick in consumer spending cannot be interpreted as sustainable improvement in consumer's financial situation. The consumer fundamentals are:

1) Average debt still high
2) Average asset way down (stocks,home price)
3) Increasing unemployment rate
4) Looming inflation
5) Aging baby boomers no time left to save

At best market is having selective hearing and totally missing the broad negative undercurrent. GM is pretty much dead. How can a company run by UAW and federal government be competitive? Over and above Fannie and Freddie, now AIG and Citi are practically GSE’s. US taxpayers can’t even get any tax write-off ‘s for the trillions of TARP and TALF losses. The depletion of inventory does not mean that there will be new capital investment.

From where I sit the DOW range till 2010 will be 7,000-8,000. Over 8,000 sell, under 7,000 buy.

Micro-Banking Has a Go in the U.S.

greedcanbgood - Thanks for your comment.

Granted lending involves uncertainity. By pricing risk appropriately (interest rate) the exposure is covered. Unfortunately large banks are at a disadvantage due to regulation. They have a cap on the price and forced to lend. In P-2-P lenders are not forced (atleast not yet) so mis-pricing is avoided.

Moreover I think (if not now over time) harvesting the combined knowledge of lenders who are pooling money will be significant in risk evaluation.

Micro-Banking Has a Go in the U.S.

P-2-P lending is here to stay. Just like how internet and blogs are replacing the traditional news outlets, P-2-P lending by means of large number of lenders will make much better risk assessment and price loans accordingly. More importantly they can avoid government forcing them to make loans that are sure duds.

Banks in Limbo = Financials in Trouble

If any of the major banks is nationalized then it will impact all the banks in terms of their ability to compete with a government agency. So nationalization of any bank will impact the overall banking industry.

Why Capping Pay Is Likely to Work

With SOX and all other kinds of pain in the (you know what), why any decent person would want the CEO job. Time to dump the stocks on companies that would need government money.

Bank of America Facing Mortgage Servicing Losses

Going by CITI example bigger is not better. Global diversification did not insulate CITI from mortgage industry failure. The key business issue in banking is risk management. When banks get bigger they tend to loose control. Economy of scale and cross division synergy does not really happen in banking. Consumers go a la carte for their financial and credit needs. I think BAC stock valuation will be discounted for the large unfathomable risk due to the amalgamation of Merrill and Countrywide.