February 24, 2009
2009-2-24: The markets
rose today as much as they fell yesterday.
was up 54.11
to close at 1,442,.
and the S&P
to end at 773.
up a bit at $39.89
a barrel, and gold fell back to $969.500.
to end at 45.49.
Happy days are here again! Whoopee! Of course, the VIX
is showing marked complacency. There's no way that this dip could be a
major market bottom, but perhaps it's a successful retest of the November
2008 lows. If so, then as I've mentioned below, the economy should hit
bottom between May and August, and begin a slow recovery.
might be expected after dropping about 5% in three days, the indices are
rebounding this morning. If the indices were to go back up from
(1) the Dow has made a new low below its November 21st, 2008,
(2) the S&P 500 made a new closing low below its November 20th
close, but its close was two points above its November 21st intra-day low,
so I'm not sure whether we should call yesterday a new bear market bottom,
or whether we should say that the S&P 500 successfully retested its
November low, and
(3) the NASDAQ Composite has remained comfortably above its November
20th close of 1,316.48.
Dr. Irwin Kellner observes that Evidence mounts that recession's worst is past.
Dr, Kellner isn't suggesting that the economy has bottomed but that it's
not deteriorating as fast as it was... in other words, that it has passed
its inflection point (point of steepest decline). That suggests that the
November 20-21 stock market bottom was the inflection point, and that the
economy should hit bottom sometime between late May and late August. Of
course, this assumes that this once-in-a-century economic contraction,
like all the Fed-moderated contractions since World War II, looks like an
upside-down bell curve. But what if it's shaped like a wave-slide?
The stock market should soon tell us.
Mark Hulbert has this to say today: Bear is dead;long live the bear
Paul Krugman's latest articles are:
(1) Permanent Link to Nationalization fears
This article observes that some major banks, such as Citi and Bank of
America, have been able to stay in business only because the government
has kept them from collapsing. They're unable to raise capital
because their stock prices have fallen so low that their total market
capitalizations are less than the additional capital infusions they need
to keep functioning. They're already wards of the state. Furthermore, the
only thing that keeps their stock prices above zero is investors'
perceptions that the government will stand behind them. Otherwise, they'd
be out of business by now. In the meantime, there's a growing fear on the
part of the banking lobby that taxpayers will demand partial or full
ownership of these bankrupt banks until the banks pay us
(2) Permanent Link to Who supplies the talking
points? This article asks: now that the Bush White House is no longer
feeding talking points the Rupert-Murdoch-owned media, who has taken over
this function? Who tled Representative Boehner astray? (Representative
Boehner complained about the taxpayers subsidizing Fannie Mae and Freddie
Mac without, apparently, realizing that Fannie Mae and Freddie Mac are now
(3) This article, Permanent Link to Ending welfare as we know it,
mentions the difficulty that former President Bush' political appointees
are having finding new jobs.
(4) Permanent Link to Liquidity preference versus loanable funds, televised (wonkish, with video)
concerns a mistake made by columnist George F. Will in a televised
discussion with Nouriel Roubini and Paul Krugman (among others).
(5) Permanent Link to Entitlements on the back of an envelope
observes that if U. S. health care costs continue to outpace inflation by
2% a year until 2050, "even savage cuts in Social Security will make
(6) Permanent Link to “Highly unlikely”-
takes issue with the government's latest official mention that
unemployment rates "surging to 10 or 12 percent or home prices
dropping 20 percent further" are :highly unlikely". Dr. Krugman
sees such numbers as more likely than the government is stating.
Meanwhile, as I read Michael Ashbaugh's Oversold? Almost
(his title is "U.
S. markets cut in half; knocked back to 1997,"), I'm thinking
that the title "Oversold? Almost" is somewhat misleading. Mr.
Ashbaugh concludes that although the market is exhibiting an,
"obviously oversold condition, the technicals aren't signaling a
tradable low just yet." He then shows that all three indices have
broken down, and that, at the same time, the VIX is still too low to
indicate a major market bottom. And in any case, he's talking about a
tradable low rather than a cyclical bottom.