I’m not impressed. It took so much to get us in trouble, and too much time for it to show up I don’t trust an instant turn around.
We are still in trouble with the way congress passed legislation that put us in so much debt.
There are no free lunches unless it’s the one the government is taking from the middle class to pay off the debts caused by the poorly thought out legislation, and the greedy lenders that got us in this mess.
Whether the economy or banking sector profits are recovering are two different questions. It seems that bank earnings from lending have never been spectacular. I guess that is one reason why they they went into to more risky business. I beleived those who said a year or so ago that the economy was “fundamentally sound.” I even agree with the president who says it today. I think some paniked executives managed to convince everyone that they were too big to fail. They certainly thought so them selves. I doubt it. Now the bail-out and government programs with tragically illconceived spending and more tax (and yukk, Cap and Trade – the stupidest idea ever) have become the problem. Some bank stocks shoud do very well considering their depressed prices and government supplied liquidity. But the chickens will come home to roost if rates go up quickly and significantly. Wasn’t that part of the problem for S&L’s with large, long term, low return loan portfollios?
Let me do the math. We, all of us, gave Wells Fargo $25B +… they now have a profit of $3B.
In other words, they are $22B short? Also, are they going to pay the tax payers back with the $3B, or are they just giving those out to their shareholders? When do we get paid back?
Until all the money has come back that we gave the banks, until then I don’t see the big turn around. Until the other $2Trillion that banks received in the last 30 days are paid back, until then we can’t really talk about the ‘happy days are back’. We still owe all that money plus interest.
Hardly anyone talks about the derivaties bubble ($70Trillion) that still lurks out there. We have a long way to go.
Most of the ‘good news’ is nothing more than window dressing. Too many problems remain.
It will be over after we see most organized crime leaders (wst managers) in jail. How it is possible to combine many billion dollars’ from pension funds and invest into AAA rated based on nobody knows base papers without coordination between all financial institutions involved?
I think a dose of caution is in order. But too much skepticism is not helpful. The health and well being of the economy has a lot to do with people’s confidence. If investors are confident on the economic recovery we will recover. But skepticism at this stage is really not helpful. It’s like throwing water on a fire that you’re starting. Where’s the sense in that?
there are 3 reasons for the global crash-
1) GREED
2)LEVERAGING
3)DEREGULATION
Number one is with us to stay
Number 2 and 3 are the governments fault for allowing it to happen-in the words of mark twain, many a man was saved from being a thief by finding everything all locked up–the locks were taken off and greed filled its pockets-it will take at least 5–10 years for the world to climb out of this economic mess and hopefully all concerned will learn their lessons.It is a great opportunity however to get rid of the dinasaurs –from car companies making gas guzzlers to fat cat insurance and banking companies. Most important of all America must return to its manufacturing roots and make products here instead of importing cheap crap from the far east. The idea of having other countries make everything and have the US consumer carry the economy is the epitome of human stupidity and not sustantiable.
Paul you are right, this rally is pretty silly and may get sillier before it is over.
If there is one thing this bear market needs to do for the sake of future long term investing, it is to shake us up and out of the irrational expectations of double digit returns we have grown to expect over the last 20+ years. This rally indicates many of us are obviously not there yet.
Consequently, no matter how long this rally lasts or how high it goes we have not seen the cruel bottom yet. We will know we have reached it when the movement up is MUCH more gradual, rational, orderly, than we have witnessed during the past 20 years of bubbles.
Of course that is the positive side of the bottom. The negative side is that the bottom will be so low, so cruel, that many people will never get back into the market for years and years.
No these are false positives. Wells Fargo is simply suring up its balance sheet b/c it knows it has massive write offs coming when the 2nd recession hits b/c of commercial real estate failures and the anticipated 150% increase in inflation. All this thanks to a rediculous private Federal Reserve Central Bank which enables our massive National Debt and creates the recessions and depressions.
Let me see — we are spending trillions on the financial bailouts. But we can’t know exactly where the money went. But we think some went in pass-throughs from AIG back to the banks. We also bailed out the banks directly and indirectly. And now we will have a private-partnership initiative in which the banks could buy their own assets back using taxpayer money.
Then a bank reports a “profit”. Yes happy days are here again; Maybe 1960s LSD/purple haze-type happy days. Yes that profit is your money.
Enjoy the rallies because that what they’ll be for most – an up and down thrill, dreams, and little cash in the end.
Like another poster said. “things are never as bad or as good as they seem”. My personal situation is better than a year ago eventhough my 401k is in the tank like everyone else. I’m not to concerned b/c I’m not retiring soon. I haven’t won the lottery or gotten a promotion. But like more than 90% of the people here I still have a job. More than 90%. My PERSONAL situation is better b/c I have little debt and have a budget and didn’t buy more house than I could afford. Why all the Chicken Littles? If more than 90% of the population did like me… If your unemployed, that’s a different story but most people aren’t.
History and action tells a different story. The depression did not bounce it stabilized and leveled off. If this is the level we are short some 6 million jobs, and re created jobs have to be so well payed that they replenish a deficit plus create buying power of new car capability. That’s wind fall, and only wall street fats and corporate bonus babies are going to achieve such a position. The bailout had to go thru the citizens hands, it didn’t, so recovery will be long coming. 60 plus years to get here.
Good well-balanced column IMO. Thanks.
A short response to Scott’s (Davenport, Iowa) comment that “Government is not the problem, in this case it is the solution.”
Please see
http://www.cnn.com/2009/US/04/09/hawaii.volunteers.repair/index.html
The above referred-to story shows how Americans can solve a lot of their own immediate problems by pulling together without waiting for Mr. Mom (Uncle Sam) to help them.
It’s a little embarrassing, I am sure, to all the governmental agencies (not just the ones in the story) to realize that in the end, these agencies (and politicians) are NOT really all that important to the electorate after all.
As they pull off one gabfest after another in Washington DC and other capitals around the nation, Americans are pulling up their socks, putting on their shoes, and getting busy getting things done.
Houses that are foreclosed on, are often quickly resold to new owners. Sometimes old owners having been foreclosed on, go out and buy new houses more cheaply.
The market and free independent Americans are the ones who will ’solve’ the problems.
No government can do better.
If we wait on help we just become more dependent and miserable (it’s called voluntary slavery).
Getting out and empowering yourself gives you a moral boost and a morale boost.
You and your neighbors in many situations are less helpless than you might imagine.
Happy Easter to Everyone!
To the average working person (those few that still have jobs to go to) the stock-market is a joke. It means nothing. It is a barometer for nothing. Like the old Barry Mcguire song said “you may leave here for three days in space, but when you return it’s the same old place.” It’s all a manipulated put-on. A dog and pony show for the consumers benifit.
Unemployment is adding foreclosure fuel to the real estate inferno and will make the credit card storm worse. This will get worse if benefits are not extended even more.
GM and Chrysler may soon go belly up.
What’s over?
I think we are all in for the largest tax increase in history within a few years! Some one has to pay for all this WallSt bailout nonsense!
This country desperately needs a Constitutional Amendment mandating term limits for all members of Congress and the Senate (two-four yr. terms the same as the President and Vice President). Until this comes about, nothing positive will change. Try asking the 650,000 a month who are losing their jobs if the economy is starting to recover.k
Paul I do appreciate you honesty here.
Who was it that said those who fail to learn history are bound to repeat it?
How are consumers going to spent when everything they earn goes in paying taxes? I live in NY our new Budget will cause every New Yorker an addition $2000.00 to 3500.00 in increased taxes.
The oligarchy (Obama,Pelosi,Reid,Dodd,Frank,Bernanke,Geithner, and the wall st. bankers) along with their hack left wing media outlets are attempting to brainwash the public into believeing that recovery is starting. Does any middle class working American really buy into this? I think not.
Let me see. How do you go from a 2.5 billion dollar loss to a 3 billion in profits in 3 months? Change the accounting rules just before you have to report earnings!! Wallah, a profit magically appears. Life is good! Lets celebrate! We just recieved the authority to overvalue those stinky assets on our balance sheet so that our capital ratios look great! On top of that, now we get to sell those assets to private investors at inflated prices and stick the tax payers with more of our losses. Whoopie, life is great if your a bank. There sure is a ton of lipstick on this pig.
When has the market ever conducted itself in a sane manner?
Remember, this is the same market which so irrationally sunk itself to all time lows and gave us 700-900 point daily swings just a few months ago.
Why would they possibliy think good news for Wells Fargo isn’t good news for everyone else?
Isn’t this proof positive of the ridiculous notion of selling on the news and buying on the rumors?
The worst is not over. The Bank “stress test” apparently will not result in any closures of big banks, but I am sure that the executives are stressed about the amount of new capital their banks will have to raise.
In addition, the life insurance companies are facing trouble. If it were because of “toxic assets” they had purchased (as they claim), we would have seen them in line long before now. Their legitimate problem with some “toxic assets” is being compounded by rising delinquencies and potential losses from the loan portfolios secured by and investments in commercial real estate.
As Joe Lewis said of Billy Conn, “He can run, but he can’t hide. After 12 rounds, Conn was ahead on points, only to be knocked out by Louis in the 13th round. It is about the12th round for this most-current bear market rally.
Things are never as bad as they seem, nor are they as good as they seem. Reality is somewhere in between.
We’re just coming away from the “sky is falling” mentality. Are things great? No way.
There was a period of irrational negativity, and we’re just coming away from that.
And the timing is about right. The whacked out, left wing media had to paint as bleak a picture as they could, so people would think things were about to totally fall apart, so the great savior could salvage something from the mess. The deeper the psyche was driven down, the greater the bounce for Obama to lay claim to.
For those who prepared for this day there is no “worse”, just continued frugality. For those who overspent for the past 10-20 years it will be worse forever.
Sadly, for those in Government and Commerce who seduced too many into this mess (Frank, Dodds et al) there is no worse. They will enjoy their luxury living to the day they die.
Isn’t this the way we’re supposed to think ? Duh…Market up good, Market down bad. Never mind any analysis of how we’re going to pay for our governments lavish spending of our tax money. Oh wait a minute, there is an answer —-TERM LIMITS FOR THESE PIG’S!!
excuse me while i stop LMFAO! credit card rates are going up to unconsionable heights, credit card limits are arbitrarily slashed to cut exposure, we are still hemmoraging jobs like nobodies business, the majority of real estate selling is bank owned low priced homes, builing is stagnant except for the “new” cheapy 1200 square footers, car sales are about as low as they can go with the underlying infrastructure in pre-bankrutcy, commercial lending is but a dream, dining out at a regular resterant is almost as cheap as going to micky-d’s and cheap is the new chic. insurance companies are the coming up derivative victims, banks are no better off than they were 6-12 months ago and gas has started another steady rise. the stock market has recovered………..about 25% of it’s recent 50% loss, home prices are back where they were in 2003 and many foreclosures loom. more and more people are underwater on their mortgages and cannot refinance because the thresh hold has gone from “can you breate?” to “do you have at least a 700 credit score”. there is much pain still to come.
the good news is: all trends reverse at some point.
Markets will be all over the place until the fundamentals in the economy begin to recover. In the mean time the gamblers will drive the markets down (short) or up to get the quick buck, not investing for any long-term in companies. The grab what you can and run mentality.
If you really believe all is well, really, I have some sure fire investments that are guaranteed to generate 25% profits forever.
Not really.
Until we figure out how to build our own $hit there will be no real recovery.
The stock market is a joke anyway. Go to Reno for crissake, the odds are much better and the games much more fair.
I agree with most comments on this page and for once I agree with Paul, now I’m really scared. My gut and a lot of reading tells me not till we test the 5xxx range will the bottom finally be putting in a true bottom. Greed today and then losses tomorrow and the market will be down again. Just wanting for the next big economic shoe to drop, GM or Chrysler and perhaps both go bankrupt, commercial real-estate bubble finally pops (all those empty stores), Iran tests a nuke, and the list goes on and on.
Have we hit the bottom? Most likely, but it will be a bumpy ride for a while. Some of the retail environment is similar to that of the market being oversold. When things got bad consumer pulled way back so now they need to need to replenish so to say. Look to early 2010 for things to emerge. By that time all the over supply of almost everything (except housing & autos) will likely have come into balance and we’ll start to see, dare I say demand start to pick-up. The point of the stimulus is to throw create or maintain some employement level that will consume something. The go go days of consumerism are pasted, but a more balanced and moderate economy will evolve.
As for financials easily clened up by letting the FDIC do its thing. Cleans up the books starts a new. I think the markets have already taken it into account. And for those who bought those stocks at hight prices. When you’re already under water it doesn’t matter after a while if it’s 20 feet or 100 feet. Positive would be the capital loses to use against the capital gains of the new economy.
In order for the economy to improve, people will have to be somewhat confident that their jobs are reasonably secure, and that the value of their homes has, at minimum, stabilized. I see no signs of either occurring now or in the foreseeable future. Therefore, I am really pessimistic about the economy.
I agree on the jobs issue. On the one hand many investors could blame the whole economic downturn on a few bad mortgages – but then they can completely ignore the impact of millions out of work and more following them out the door every week.
What are they smoking? Can I have some?
In order: No, Yes, and Yes.
Banks have more pain ahead, but not all of them; we have over 8,000 banks. Break up the bad banks (AIG, C, etc.) and then let them fail in an orderly fashion, the good banks (BAC, JPM, WFC, etc.) will acquire the good assets at a fraction of the price, let the bad assets rot, and the surviving system will be much stronger.
Retailers are past the point of maximum pain. Consumers are dramatically reducing their mortgage debts, spending less on housing, and freeing up more money to be spent on other things, such as retail. Grossly mismanaged retailers will still go broke (e.g. Circuit City lost all of their best salespeople), but the survivors will profit.
The economy is bottoming now. January was probably the worst job loss month. As the rate of job losses contracts, we should stabilize by the end of this year and grow in 2010. You will start to notice the recovery when the ARRA Stimulus Program starts to kick in during July.
The stock market was vastly oversold because Wall Street panicked, selling everything willy-nilly when the investment banks failed in September. The market is still cheap, and there are bargains out there. But, be careful: no finance companies.
This is a classic Bear trap.
GM and Chrysler are close to Bankruptcy.
Home values are still going down, supposedly at a lower pace.
Unemployment is still extremely high and only lower compared to last week, because they revised last week number up. Continuing claims is at record level and increasing.
We cannot and will not have a recovery until the housing market stabilize, as house value goes down the banks collateral keeps going down.
You cannot renegotiate a mortgage payment low enough for somebody with no job.
Unemployment will have to stop going down, before we have a recovery.
Banks are going to post profits because Mark to market was re-engineered and they can mark up assets that were marked down with the previous rule. They still carry all these toxic assets on their book, they just painted them pink.
I am slightly optimistic on the markets, but not at all on the economy.
I don’t see how anyone can think the worst is over when we are bleeding 600 thousand jobs per month. It is a vicious circle, all of the gains this quarter will be lost next quarter when people can’t spend because they don’t have jobs/ income.
I won’t be high on the economy until the employment numbers turn positive.
I think the issue here is the fact that people are looking for a bottom and assuming that once we hit bottom there’ll be a big bounce. We may well be very close to a bottom, but if so, I suspect we’ll be here for quite some time to come. There’s a long way back to go, and where will it come from? Retail? Nope. Housing? Ha ha ha. The auto industry? Probably not. General construction? Short-lived only until the stimulus money runs out.
Anyone see the path back??
From the old song: “Fools rush in where wise men fear to tread”!
The ealrier comment had it right in my opinion, that none of the fundamentals of our economic malaise are improving. Markets move on one of two aspects: Fear – or Greed. At the present time the stock market rally is likely a tug of war between the two factors. This may go on for some time.
As to banking, it appears that the industry remains stressed and continues to have a ton of toxic assets which must in time be worked off probably at losses.
Retail is dead other than necessities such as food and health related. With unemployment continuing to rise and personal debt at the glass ceiling, the contraction in consumer spending is only expected to continue.
It will be 2012-2015 before we are through this mess, if then.
It’s funny how two story’s can mesh and bring the whole picture into better focus. Prior to reading this artical I read one which stated that oil prices are expected to rise sharply due to some encouraging signs in the economy. The artical was very carefull to point out that demand for oil continued to be low but because consumers might be more inclined to spend, ‘why not spend on oil?’ God forbid Americans spend money on housing, cars or other areas in the economy that are dragging us into economic quick sand. It is obvious that big oil is very much like a parasite living off of it’s host, very determined to drain the host to the brink of death but carefull not to kill it. Until there are laws against draining the public coffers simply because you can, this country will continue to limp along and feed any parasite that is lucky enough to attach its self to us. Government is not the problem, in this case it is the solution.
We’re not back in boomtimes but hey,
even being stable to slightly better
is a whole heck of alot better than
being in an all out depression….
Paul M.
Fundamentally, nothing has changed in the economy over the last several months. People are still losing their jobs, businesses and consumers are still deleveraging, and overall their is still a significant climate of uncertainty.
Same store sales, incidentally, are not a very good measure of retail performance. I was in retail management for 8 years, so I am speaking from a position of knowledge here. As a simple example, if I increase my sales by 5%, from $100 to $105 say, but my profit margin decreases from 10% to 8% I actually contribute significantly less to my bottom line. If retailers are taking a loss in order to move merchandise (and I suspect many are) that is great from a liquidity standpoint, but it’s tough to overcome negative profit margins by increasing volume.
Everyone wants a bull and they have been hearing terrible news for neraly a year of more. So its relative that we can only travel so far down then we start to think hey things are getting better because our threshold of negativity has been altered so that meager signs of improvement which aren’t hard to show currently feed the rally. Besides they need to get the public excited so they can sell the shares they have been buying from them all the way down back to them and make a profit. It will turn again and the manipulators will buy again wht the foolish public is losing money on again.It goes on and on. If anyone thinks we will return to the glory days anytime soon you are sadly mistaken. Final comment is that we have been living off credit for years and it got crazy the last 10-15 years especially with real estate. Massive amounts of equity have been erased and its not coming back anytime soon so enjoy the rally but don’t bet the ranch. If you want to see retail in action next time you go into a mall if there is still one surviving in your neck of the woods look at what they sell. Mostly stupid stuff that nobody really needs. That should give you a good clue about how far out there we have been in our spending habits. This isn’t a bull rally ts a bulls**t rally. When you learn the difference between the tow and stop listening to the medias spin on stories you’ll stop losing money.