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> On Thu, Apr 30, 2009 at 7:01 AM, Joshua wrote:
> The 82-83 Reagan rally was good for roughly 70% to the upside from trough to
> peak. I clearly have been too pessimistic.
> At this point, are you looking for substantial upside in equities from here in light of
> 7% deficit/GDP? My concern has been that the decimation in non-bank lending
> (roughly 75% of prior total lending) would be more than enough to offset the
> positive effects of deficit.
That caused the economy to weaken/inventory liquidation to intensify until the deficit got high enough to reverse that effect. And now proactive deficit spending is kicking in.
> Are Bernanke’s programs really reinvigorating securitization markets? Clearly
> something is working for them.
It’s mainly the increased deficit spending that’s turning the tide. Yes, the Fed did a few things that helped some, but overlooked what they could have done (and should still do) to ‘normalize banking’.
Also, we can get a V shaped financial market recovery as it was pricing oblivion, while the real economy looks more L shaped.
And we are also always subject to external shocks like swine flu, wars, supply shocks, etc.