Daily Investment Interpretations

January 8, 2009

2009-1-8:   Today was a quiet day.  The NASDAQ gained 17.95 points (1.12%)  to close at 1,617, the Dow lost 27.24 points (-0.31%) to close at 8,742 and the S&P 500 tacked on 3.08 about (0.34%) to land at at 910. Oil ended the day  at $42.50 a barrel, and gold rose $12.80 to $854.50 an ounce. The VIX fell nearly 1 points to 42.54. In other words, nothing happened.
    I'll mention two new articles: Buy munis ahead of Obama's bailout, Pimco's Gross says, and More questions than answers.  
    Business Week has been consistently gloomy in its assessments of the economy, but in this week's issue, it's becoming more upbeat about a turnaround in the second half of 2009. 
    Here's another optimistic article about a second-half turnaround: Eric Rosengren: Hard times to ease mid-2009. Mr. Rosengren is a pending Governor of the Federal Reserve Board. If these pundits are correct, then it will be wonderful. It will mean that we can aggressively re-enter the marketplace and recoup our losses. The basis for this optimism seems to be the dramatic steps that the Federal Reserve is taking to underwrite the economy. With mortgage rates scheduled to fall as low as 4½ %, extensive refinancing may occur, as well as the establishment of new home mortgages. The government has made it plain that it will take whatever steps are necessary to keep the economy from sinking deeper into recession.
    For now, the pundits believe that this will work.
    I'm in the process of modifying the Daily Investments Interpretations Archive so that although the option of looking at the whole thing all at once will be preserved,  individual days can accessed individually. But you might want to take a look at the daily summaries earlier last year to get the flavor of the misplaced optimism that kept leading everyone astray. The leading market mavens were urging us to buy, buy, buy, all the way down. The technical analyses had the full predictive power of a fortune cookie. 
    If during the rest of the year, the markets don't go much below where they are now, I wouldn't be too concerned. I'm hoping that we might have a better idea within the next week or two whether this economic mess is going to continue its downward spiral or whether the government (or governments) are going to be able to contain it. What we don't want to do is to buy into a Second Great Depression.
Important Update: The Cabot's China and Emerging Markets newsletter has just advised adding a third stock.