Saturday, August 1, 2009

The Government is the New Economy

Early GDP numbers came in, yes, better than expected yesterday, at only -1%. Of course, Q1 was revised downward to -6.4% and all of last year's GDP was revised downward to an anemic 1%. But green shoots are strong, and the stockpiling of inventories and more importantly, massive government spending to the tune of 20.9% of U.S. growth, kept GDP afloat and will push it into positive territory Q3.

So where are we really? With markets 40% off their March lows, it begs the question of where can it go from here? If 14K was based on corporate fraud, and 6,600 was based on fear, what does 9,300 tell us? Does the market really price information in 6 months ahead? How did that work for you in 1999 and 2007? Not so good.

We've never seen the government intercede in the way they have over the past year, pumping money into large banks (who have not yet lent that money to anybody). So, if Q3 is the pinnacle of influence as per GS and Itulip, and inventories don't float higher in Q3 as expected as Karl Denninger predicts (for an in-a-nutshell view of how the MSM treats anyone who doesn't push a recovery, watch this, are we primed for collapse #2?

Yes. But over the next month be wary. I sold out of SSO yesterday with a 200% gain in 10 days, wary of a sudden and drastic retreat, having held my cards through the jobs number and GDP (scary couple of days). When July jobs are revealed on Friday, economists are looking for a meager loss of only 275K. This seems impossible, but anything near this number should shoot the market higher. But as regional banks and other laggards rise 300, 400% off their March lows, it's at least time to make a list for that day in August or September where we again pull the trigger.

In the meantime, anyone else appalled over the bonus list just revealed from TARP recipients?
BAC ($45 billion in TARP) doled out 28 bonuses over $3 million. Citibank 124. GS 212 with the average bonus over $160K, after they've borrowed up to $60 billion of our dollars. We really must be a bunch of suckers. At least Alan Grayson asked Bernanke this past week how handing the equivalent of $3K to every New Zealander helps our economy. Ben didn't like that question much.

Regional Banks on our watch list (some from my blog last year, more recently from a Markman article that will not qualify as too big to fail):

Zion $13.58
RF $4.42
Key $5.78
SNV $3.49


Anonymous said...


Excellent observations... Nice trade on the SSO. I will hold my positions a bit, but this time back them with stops as not to get run over should the market take a dive...

At this point in time, it seems as though nothing short of an audit of teh Federal Reserve...or ... another bailout for commerical banks is going to stop this train from rolling...

Interesting observation though... more and moer Americans are becoming suspicious of the bailout nation... or any other programs that seem to be teh quick fix...

What say you?

P.S. Boom/Doom and I are going to a LaTourette meeting on the 11th. Feel free to include any questions you would like answered...


AX said...

Thanks, TC. The market does seem to want to roll higher, and perhaps we should cover to that end as well with an even more OOTM call, but how long can the fantasy last? Even Obamas says we're still mired in recession.

Ask LaTourette if anyone aside from himself, Grayson, Paul, and Kucinich are people we can trust and how the audit is proceeding. Ask him why we should keep paying our morgages if those who do have no chance of refinancing and could probably avoid making payments for 3-4 years and still live in their house if they just stopped today.