Friday, March 21, 2008

has the bottom been reached?

in spite of the gs and leh news on this market off-day - s and p is lowering its outlook on both - it's entirely possible we've seen the bottom in this market for quite some time.

yes, business is slowing in the us. that's what stocks have been saying for months. we are in a bear market, after all. so that's why it's time to start thinking about better times if you're a long.

in a remarkably swift move, the oil/gas/agriculture/infrastructure was taken apart. the rally in fnm and fre cannot be overemphasized in my opinion. and last week, mortgage rates finally went under 6% again. they really belong at 4% and change, and that would start the housing cycle once and for all. when you get fha guarantees and lower rates and fewer homes built, and a peak in resets, you get a bottom.

all of this is to say that when everyone acknowledges that we are in a tough recession, stocks reflect those prices and they reflect an endless recession just as they reflected an endless expansion not that long ago.

it is true that bear markets last a few months more than this, but anyone who saw a multimonth move happen in three days to the commodity markets has to think that we could be in for a slightly shorter bear market (even as it seems inconceivable that the bear market could ever end when the numbers just turned bad).

in my opinion, there is no doubt much of this recession was created by the sheer incompetence of this presidency and its minions: everyone from a fed chief who failed to understand the yield curve or the fragility of the banking system, to a treasury secretary who drank the "fundamentals are sound" potion, to a president that cared more about destroying fnm and fre because of their long-standing ties to the other party and their violation of the laissez-faire market doctrine that this administration has pursued. when one layers in a presidentially-mandated food inflation -- do you think this president has ever gone to the grocery store? -- you know that our own incompetence created much of this recession.

but with the bsc collapse and the need to scrap the laissez-faire policies, which were so one-trick (cut taxes), you have to leave open the possibility that things can get better out there. and i think that's what the rally this week was about.

looks like a floor's been set.

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