The pattern continues
Don't count on "Change" to help the Stock Market
The pattern continues. Just a few days before a long weekend & the presidential inaugural, the banking system came close to another meltdown, only to be saved by the Federal Government, again, another in the ongoing, rolling, systemic failure of the financial system. Its now clear that CitiGroup has failed & has essentially been nationalized. BofA must have notified Treasury that the Merrill deal was in jeopardy as the losses would be too big for it to absorb, or just decided it was the right time to play its hand for a government deal like JPMorgan got for Bear Stearns, so Ken Lewis got the Jamie Dimon package of government guarantees & backstops in order to takeover Merrill Lynch & its rotting debt portfolio. Neither is a good thing & neither will spur demand for borrowing.
Both incidents point to the unmistakable fact that the financial system is still fragile & all the efforts to date have NOT resolved what is wrong. The government has again stepped in front of the market right in the nick of time to defend against further equity market declines. The only difference this time is that they did it during normal working hours rather than on Sunday night....probably a scheduling conflict with the upcoming inauguration.
Now market players are focused on Tuesday's inauguration of President Obama. While that event will be inspiring & exciting, it will not spur a pick up in economic activity, except in Washington DC. Many 'hats' are being hung on the change that is coming, especially the economic recovery plan, hoping that the bulk of the change comes in the value of stocks & homes.
The unfortunate reality is that the new president will be hard pressed to create robust economic activity, regardless of how much change he ushers in. The dismal economic situation will endure for quite sometime, probably six months minimum. The economy is in a downward trajectory due to all the bad things that have occurred & that will not reverse quickly. President Obamas first 100 days, which ends May 1st, will be filled with historically weak economic & corporate reports, ongoing municipal & corporate downsizing, & continuing consumer retrenchment.
If congress acts with urgency, it will also be punctuated by a trillion dollar stimulus plan, the equivalent of a defibrillator electric shock blast for a heart attack victim. When economic activity does stabilize, stop declining, the recovery will be a long process that will not lend itself to a sharp & steady upturn. Rather it will be slow & laborious, starting & stopping many times as the various government assistance, supports, rescues, bailouts, zero rates, & stimulus work there way into the broader economy. The repair & recovery of our impaired economy will take a very long time & to expect anything different is just hopeful.
Don't count on President Obamas promise of Change to alter the facts & reality of our economic predicament or to make the stock market rally, especially in the nearterm.
Both incidents point to the unmistakable fact that the financial system is still fragile & all the efforts to date have NOT resolved what is wrong. The government has again stepped in front of the market right in the nick of time to defend against further equity market declines. The only difference this time is that they did it during normal working hours rather than on Sunday night....probably a scheduling conflict with the upcoming inauguration.
Now market players are focused on Tuesday's inauguration of President Obama. While that event will be inspiring & exciting, it will not spur a pick up in economic activity, except in Washington DC. Many 'hats' are being hung on the change that is coming, especially the economic recovery plan, hoping that the bulk of the change comes in the value of stocks & homes.
The unfortunate reality is that the new president will be hard pressed to create robust economic activity, regardless of how much change he ushers in. The dismal economic situation will endure for quite sometime, probably six months minimum. The economy is in a downward trajectory due to all the bad things that have occurred & that will not reverse quickly. President Obamas first 100 days, which ends May 1st, will be filled with historically weak economic & corporate reports, ongoing municipal & corporate downsizing, & continuing consumer retrenchment.
If congress acts with urgency, it will also be punctuated by a trillion dollar stimulus plan, the equivalent of a defibrillator electric shock blast for a heart attack victim. When economic activity does stabilize, stop declining, the recovery will be a long process that will not lend itself to a sharp & steady upturn. Rather it will be slow & laborious, starting & stopping many times as the various government assistance, supports, rescues, bailouts, zero rates, & stimulus work there way into the broader economy. The repair & recovery of our impaired economy will take a very long time & to expect anything different is just hopeful.
Don't count on President Obamas promise of Change to alter the facts & reality of our economic predicament or to make the stock market rally, especially in the nearterm.
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