February 4, 2009
markets fell today. The NASDAQ
to close at 1,515,
the Dow doffed 121.7
to end at 7,957,
and the S&P
to land at 832.
settled at $40.10,
to close at $902.20.
inched up 0.79
So what happened today? The banks are signaling further trouble, starting
with the Bank of America. Also, although this wasn't mentioned, the fiscal
stimulus package appears to be running into trouble on Capitol Hill. The
Republicans are doing what I suspect the Democrats would do if the tables
were tables were turned: holding the other party's favored legislation for
ransom. In the clinch, the minority (Republican) party will probably give
in but not before they've tried to get as many concessions from the
majority party as they can. After all, they'll have to answer to their
constituents as well as to the party apparatus.
Krugman had this to say today: Permanent Link to About that deflation risk.
His conclusions:"There has been a distinct change in
tone from the Obama team today, as they seem to have become suddenly aware
that there’s a real risk that the stimulus plan will either fail to
pass, or be emasculated to the point that it doesn’t come close to doing
the job. Obama himself has warned of catastrophe if we fail to act, and
— finally!– denounced
the tax-cut philosophy. Meanwhile, Larry Summers has finally made
the point I’ve been pushing for a while — that we’re at major
risk of falling into a deflationary trap."
right now the CBO
is saying that in the absence of a policy action the average output
gap will average 6.8 percent over the next two years. Do the math: if
anything like the historical relationship between output and inflation
holds, we’re looking at major deflation."
deflation is a huge risk — and getting out of a deflationary trap is
very, very hard. We truly are flirting with disaster."
Earlier today, he had published Permanent Link to Shock and oy,
in which he lamented, "Unfortunately,
what is coming out of the US is desperately discouraging."
I have prepared an additional discussion today that attempts to
second-guess the case for an imminent bull market (see the sidebar): "With
the economy sinking like a stone, how can anyone seriously claim that a
new bull market is about to start?"
From Minyanville comes this: Get Ready for a Monster Move in the Market.
Also from Minyanville: Jeff
Saut: Making a Case for the Bulls.