MARKET COMMENT
Dave Fry at ETF Digest, March 23, 2009
Why are Ponzi Schemes always with us? Because they’re seductive and apparently so it is with Geithner’s new plan.
If his plan doesn’t work banks will walk away with whatever they’ve made while the taxpayers will eat the difference.
There isn’t a shred of transparency in this scheme since we won’t know who’s selling, what’s being sold, who’s buying, and at what price. No one’s going to tell us because authorities believe, “you can’t handle the truth”.
I’m not alone in my opinion as noted HERE.
The stock market likes all this in a big-time way since traders don’t give a crap about the details and see a short-term opportunity to make some money from the scheme. After all, making money is more compelling than rational dissent or critical thinking.
So enough with the negativity—let’s get to it.
Stocks went nuts on the housing data and for Geithner’s plan. Home sales unexpected jumped 5% beating expectations. The good news is that inventory is being taken off the market but at the price of a 15% decline in prices. The latter will hurt refinancings but that’s something to worry about down the road.
Volume was higher and breadth was as positive as one would expect. We broke through previous resistance levels on SPY for example, but now we’re quickly back to short-term overbought conditions.
The government is fully committed to monetary inflation despite all denials. This means the dollar needs to be devalued and bonds, despite the Fed’s best efforts to support them, should be in peril. The political pressure to pull out all the stops will create another bubble. Remember, stocks can inflate just like hard assets in these conditions. Be prepared with commodity, tech and no doubt, Emerging Markets.
It’s obvious I don’t like what the government or Geithner in particular is doing. But, I’ll confine myself to watching and following the tape and the dictates of our system. We may be late to some positions but at least we’re coming in with more chips than the next guy.
Let’s see if bulls can keep it going.
Disclaimer: Among other issues the ETF Digest maintains positions in: GLD, DGP, DBP, DBB, DBC and USL.
The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.
