MARKET COMMENT
March 15, 2007
Who are we to argue with government policy?
If the powers that be believe printing money
like a Kinko’s on steroids will cure whatever ails the markets, so be it.
The fact is that’s just what they’re
doing.
Today another $20 billion [“your tax dollars at work”] gets injected
to the primary dealers.
That makes $57
billion in two days!
Oh, and by the way, there is still no current program
trading statistical from our friends at the NYSE.
The delay mystery continues.
Looking back at some history we can view the end of the
dot.com bubble [below] showing the final burst higher from the fall of 1999 to
spring of 2000.
From there we had a
rebound into the summer that was, from the lows, substantial.
Position trading was impossible then.
Prior to the bubble collapse the Fed was
raising interest rates and when a recession loomed they started cutting rates
dramatically.
But those actions did
little to prevent a nearly 3 year bear market that began in earnest in the fall
and was followed by a recession.
Of
course, as we all know now, we substituted a dot.com bubble for one in housing.
Fast forward to today where we have a popping housing/mortgage
bubble that is unfolding in similar fashion to what occurred in 2000 with tech.
Bulls who believe rate cuts will be bullish may
be disappointed should they occur.
Is it different this time?
Yes, to the extent an aggressive Treasury Secretary and Federal Reserve
Chairman believe they can shower the markets with money to stimulate them in
the direction they desire.
Will that
work?
Beats me.
Let’s go back to a quiet pre-options expiration
Thursday.
The economic news today was
crummy at best.
But investors were able
to put any concerns aside and still bid prices higher on the belief that
yesterday’s low was a selling climax.
Further, primary dealers also had to focus on how to deal with an extra $57
billion of cash.
I wonder what they did
with it since some of it has to be returned tomorrow.
Silly of me to ask don’t ya
think?
The week overall was a minor loser but sure contained plenty
of drama and entertainment for bench sitters.
Again, let’s just focus on the charts that are moving
markets one way or another.
Meanwhile the usual suspects from overseas are just trending
along with mainstream US
markets.
Tomorrow we’ll be treated to more “investment entertainment”
as the CPI is due [think “contained” and “no worries” language] and quadruple
witch [March options and futures et al expire].
Given the volatility of the past few weeks there should be some unusual
activity as investors try to square-up positions which can cause odd price
movements.
No one except our friends in officialdom and perhaps some
insiders at the primary dealer network know what comes next with another money
helicopter drop.
But “thus far” [emphasis
added] it seems to be arresting market declines.
The downside of all this money expansion is
monetary inflation which should be attracting gold investors.
But, gold investors seem both confused and
rather weak-handed.
Plus, there might be
some serious producer forward gold selling occurring combined with the 400 tons
that may be sold by the IMF at some point.
So, we’ll see what tomorrow brings to close out a pretty
wild week.
Have a great weekend!
Disclaimer: Among other issues, The ETF Digest maintains
positions in: MDY, IEF, GLD, EWJ and EWA.