Re: financial market outlook

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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.


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