Why people are buying?

Market has rallied over 50% since March, banks report better than expected earnings, unemployment and loan default rate surge faster than expected.

Thank you for your help, Mr. stimulus I and II. $700 and $787 billions bailout banks and ease credit market.

Banks’ traders are in full swing to play on market to profit with the bailout money. That’s why bank’s income mostly come from trading and financing.

Corporations did a great job laying people off and report better than expected earning. However, you still can tell from the report of Microsoft and Google whose results indicated weakening PC and advertising market.

Isn’t it possible for a problem that took years to develop has subsided in just a few months? The problems are still there and the people paying for it are those collecting unemployment. Until those people are employed and can pay their mortgages, then the problem will persist.

Market gain about 20% over four weeks, it really pressure a lot of people who holds cash on the sideline who don’t want to miss the swing, but think about it, what if the traders exit the market with profit, you’re screwed. There is a winner and there is a loser, traders doubling or tripling their money by buying at March low which makes their companies (Banks, GS, JPM)’s balance sheet shinny, they are going to exit the market and start shorting it to get more money. Remember they are not investors, their job is taking money out of you FAST.

Remember it, this recession is worse than Great depression in 1929, it will be long and painful. Things did not get really bad until late 1931-1932. After the crash in 1929 you had a 52% rally from Nov to June of 1930. Everyone waved their hands and said the worst was over. Then in 1931 things started getting worse and never looked back.

Unemployment will hit above 20% before it comes back down. The only signs of real recovery are jobless rate significantly drops and consumer spending surge. In order for that happen, people need to pay off their debts and save enough to start spend again, it will take time.

The crisis is far from over, loan default will keep raise, inflation will eventually come etc… Much more banks will fail just like 1929. Market will face another challenge before year end, speculation will just make it faster and worse. I’m not sure the exact time for market drops to record low but I know people will get poor or poorer. Investors are panic buying right now will learn another valuable lesson.

Markets and Hype: A Tale of Two Depressions

Articles of Discussion:

Peering Into The Abyss
Looking Beyond The Fiscal Stimulus
Investment Implications

Investors face a serious dilemma, and it is not about the validity of the existence of ‘Green Shoots’. We are certain that the unprecedented government policy response to avert a depression-era collapse of our financial system will go hand in hand with an unprecedented number of unintended consequences, perhaps manifested by loss of confidence in the dollar, inflation and possibly both.

Related Posts:

• As long as you have stops to protect from a big drop and you got in early, you should be ok.
• We will remain in the bottom of the V or U or even W.
• From Bloomberg this a.m: “Unemployment Probably Topped 9% in May: U.S. Economy Preview
• I am old enough that I remember my grandfather’s words about his living through the Great Depression.
• Some things that I cant seem to forget when analysing this downward trend:

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