A Little Fun

Prediction: the current rally will end dramatically tomorrow (US markets on Monday)

There, that should be entertaining.

Result: fail.

DIJA 8418.77 -155.88 (-1.82)

Hardly what could be called dramatic.

My reading of the news over the weekend suggested to me that the ability of the market to suspend belief over:

• the degree to which the banks had accurately reported in the first quarter
• the unemployment numbers (US NFP)
• the meaningfulness of the bank stress tests

was essentially being challenged by reality. This was happening not just on the fringes (blogs, financial sites), but in the the opinion columns of the major newspapers. This seemed likely to cause an inflection point.

It will now be interesting to watch for the rest of the week and see if current rally can be sustained in the face of obviously bad fundamentals. My expectation is that the March lows will be … forgotten the jargon… er, tested (that’s the one!) in the next couple of months.

A few things to keep in mind:

• house prices are still falling
• commercial property loans are now entering the same part of the downward cycle
• production and prices are still falling
• employment is still falling at a dramatic rate, the January drop of 700K may well turn out to be the largest single month change, but 650K month after month isn’t much of an improvement
• there is probably still money to be made in the stock market by identifying companies that will benefit from US stimulus spending (beyond the banks… which still look insolvent to many)
• healthcare looks delicately balanced to me… if, as i suspect, Obama’s attempts to provide universal coverage are delayed / derailed by the insurance companies it might be a rough time.

This is fun! I’m not a financial advisor, and don’t even play one on TV.