Daily Investment Interpretations

March 1, 2009

2009-3-1(Sunday Night):  Stock market futures are down between 1% and 2% tonight... not that this necessarily means much concerning how tomorrow's markets will close. It might be worth noting that in order to have a meaningful bottom, we generally have to have a "downside blowout". There has to be heavy, if not panic selling, and a steep fall followed by a rapid rise. If the market keeps slowly working its way lower, then, I think, the pieces aren't yet in place for a meaningful rally.
    I consider it very lucky that we haven't had a sizable rally that would tempt money back into the markets. That poses the kind of temptation that can eat investors for lunch.
    Which brings us to Paul Krugman. Dr. Krugman calls attention (Permanent Link to No saving grace) to a statistic just announced today: that "Personal saving up to 5 percent of income. Good news in the long run, but in the long run … ('we'll all be dead'--Keynes' famous quotation). What it means now is that the downward pull of slumping consumer demand will continue."
    In a second article, Permanent Link to Friedman and Schwartz were wrong, Friedman and Schwartz argued that the Great Depression was caused by the failure of the Federal Reserve to lower interest rates fast enough, and two? three? generations of economists have bought into that idea. But, he says,  Friedman-Schwartz argument appears to have been wrong. Dr. Krugman says, "What we have now is a Fed that is determined not to 'do it again.' It has been very aggressive about monetary expansion." "And yet the world economy is still falling off a cliff. Preventing depressions, it turns out, is a lot harder than we were taught."
    In a third article, Permanent Link to Failing the test, Dr. Krugman writes, "It’s a depressing spectacle: on both sides of the Atlantic, policy-makers just keep falling short — and the odds that this slump really will turn into Great Depression II keep rising."