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Tuesday, December 23, 2008

Tuesday New Highs

Tuesday new highs, sorted by industry.

You may have noticed some bizarre action in the Proshares ETF's today. It was due to capital gains and dividend distribution, and it was downright bizarre. For instance, SDS, the ultrashort SPX, dropped over 11% today on a day when the index it shorted was down.

The Federal Reserve, the lender of last resort, may be becoming the lender of only resort. The TALF (yet another of the alphabet soup programs designed to confuse the hell out of everyone) is now being extended to auto dealers:

"The Fed said that it would accept securitized auto credits, including leases and auto dealer floor plan loans. " (Bloomberg)

Can you imagine watching Saturday morning cartoons, and seeing a commercial with "Big Ben" Bernanke pitching used cars? This is getting downright surreal.

Here is Econompic Data's illustrated version of the new and existing home sales report. Jake's blog is really proving to be an awesomely useful source of information.

The Madoff body count is now at 1.

Tomorrow is a half day in the markets, but I will be puttting in a full day of research (assuming I don't have another day like today), so stay tuned.


Anonymous said...

hey David. I started reading this book called Investors guide to economic Fundamentals. So far its the best book Ive read on just basic economics related to trading and investing. My understanding is that in an economic downturn the govt steps in to stimulate the economy by way of cutting rates, or/and spending money a stimulus package. I read that this is the its been done the past. My question is it possible that in the past every time we've had a downturn, we've stimulated the economy with borrowed money, essential propping up the economy? My logic tells me that what ever money we borrow should be able to be paid back with the profit from the economic growth that supposedly comes from the stimulus, essentially netting us out with zero debt, and smoother boom and bust cycles. So has this actually happened. Have the stimulus packages in the past actually resulted in real economic growth, that is, more real GDP growth than what was spend. Or have we been spending more on stimulus packages than what we get back in growth. This is my impression of what has been happening the last eight years ( according to what denninger says anyway). We havent had real economic growth because we've grown through consumption through credit, and not through productive capacity and productivity with savings, investment, and exporting. So if this is true, how will obamas plan work? Or will it work for a while, and then well be in the same mess in few years only with a bigger deficit. Because it seem to me that if we run out of resources to stimulate, then the whole idea of economic cycles goes out the window. Im scared here that sector rotation works as an investing strategy only in a healthy economy. And if our debt situation is really that bad, then these cycles really dont work if we were to have an economic collapse.
Please tell me if this way off base or not. Will the rotation still work?

David said...

Hi Eddie,

I have actually been researching a post on this very subject, which I was planning either for Christmas day or this coming weekend. Just as a brief summary, it seems that the stuff that usually gets us out of recessions (easing interest rates, government spending, etc) are not working now, which suggests to me that what is happening now is not just a recession. There is no official definition of what a depression is, but I think there is something fundamentally different, and what works for recessions will be totally ineffective for depressions. I'll try to tackle this subject further in the post I have planned, but I'm in just about as much a fog about this as anyone else. But your analysis matches a lot of what I've been reading.

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