Government Weaning

bernanke bailoutModerate gains in stocks have kicked off yet another week in Wall Street. We are not seeing a flood of buyers in the market, pushing up the indexes. Instead, what we are seeing, is a complete lack of sellers at this point, mostly due to fear of more gains in the near future. Forcing the actual initial turn is always the hardest, whether you are going up or down. You can remember back in March, when everyone was determined that the market was heading to 5000, there were many "fake" rebounds until finally the market was able to rally as a whole.

Today, markets are performing well, mostly due to Fed Chairman Bernanke saying that he believes the recession has ended, but to expect a very slow, sluggish recovery. This seems to be the major consensus, especially in the government, as he was preceded by the same belief from President Obama, Geithner, and other government officials. I guess it sounds better to the public that "the worst" is behind us, but it won't get much better anytime soon. I unfortunately, continue to believe that there are still too many obstacles that lie in front of us to firmly declare an end to this recession.

Going into next month, Wall Street enters a critical point in this recession. That is to see if our economy can walk on its two feet. President Obama and Secretary Geithner have both announced that the government is looking to get out of the business of "bailouts" shortly. Also, The Fed has announced that it will significantly reduce the amount of US Treasuries they will be purchasing, beginning in October, which up until this point has been the backbone to not tanking the Treasuries market.

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Up until this point, it has been from massive government spending, which has caused much of the "little" improvements we have been seeing in some economic indicators. Literally, trillions of dollar were injected in just a few months time, which is sure to cause "blips" in charts. If the Government stays true to its word and indeed begins to wean themselves from this economy, it will be very interesting to see where the money comes from. It will have to come from the consumer and small businesses, which at this point, have been beaten to a pole and has not been involved in this recovery. With no signs of a nearing bottom for residential or commercial real estate and a huge void still existing in job creation, I don't see how the consumer comes to bat at this point in the game. We will know a lot more about the consumer in the coming month. Happy Trading.

3 comments:

  1. Anonymous Says:

    why did not you talk about retail sales today? retails sales are good so consumer is spending which is good for economy. are you still bearish? when do you thing economy will enter into bullish? are you still shorting i.e buying srs?

  2. Anonymous Says:

    Hey FF,
    I think the markets will continue to go up until bears quit shorting into each rally, as Art Cashin mentioned on CNBC a day ago. We seem to make new highs each day on anemic volume, which does pose the question, Is it new money ? No I think not. However, I have gone long the market( Missing the biggest run up ) waiting for all the bears to give in and then.....We will see a real drop IMO. The short ETF's are done. SRS & SKF are going to need reverse splits and maybe that will be the time to jump onboard, but we may not see a substantial drop until 2010. GL

  3. PENNY STOCK INVESTMENTS Says:

    The fed is a mess.