Dow surges 500 points on bank plan, home sales

[bascule]

http://news.yahoo.com/s/ap/20090323/ap_on_bi_st_ma_re/wall_street

 

It would seem that "the markets" got the news they wanted to hear today:

 

The Treasury Department said its bad asset cleanup program would tap money from the government's $700 billion financial rescue fund and involve help from the Federal Reserve, the Federal Deposit Insurance Corp. and the participation of private investors.

 

The government's announcement was what the market had waited weeks to hear. Treasury Secretary Timothy Geithner had announced an outline of the program last month but provided few details then about how it would work, leading to a stock plunge that sliced 380 points from the Dow.

 

Well, today they got the specifics, and apparently they liked what they heard. Also, housing sales (while still down) were surprisingly positive:

 

Meanwhile, the National Association of Realtors' existing home sales report was overwhelmingly positive for the market although it showed a decline in home prices in February. Investors are embracing any sign that a glut in homes for sale may be easing. Monday's data followed a dose of good housing news last week as housing starts for February came in much better than expected.

 

This certainly puts all the Dow knows all arguments to bed.

[ecoli]

 

This certainly puts all the Dow knows all arguments to bed.

I said from day 1 that those arguments were bullshit... and that this is a bad idea.

 

I'm sure your bringing this up to be ironic, and not to imply that the Dow is right this time (but wrong during other times).

 

While we're on the topic though, isn't it dishonest of newscasters to tie the jump in the Dow to this announcement when there's the possibility that it's just correlation? (Or even if the market jumped because it predicts the plan is good, doesn't mean that the plan actually WILL be good).

[bascule]

I said from day 1 that those arguments were bullshit... and that this is a bad idea.

 

I'm sure your bringing this up to be ironic, and not to imply that the Dow is right this time (but wrong during other times).

 

I bring this up because this is precisely the sort of case given in the last thread to falsify their premise. I would say that premise has now been falsified. Of course the entire argument was fallacious to begin with...

 

While we're on the topic though, isn't it dishonest of newscasters to tie the jump in the Dow to this announcement when there's the possibility that it's just correlation? (Or even if the market jumped because it predicts the plan is good, doesn't mean that the plan actually WILL be good).

 

I don't know, and given there were two news items that were principally attributed to this jump it's difficult to say which one had what impact. Perhaps the market is merely reacting to better than expected home sales. That said:

 

Investors added rocket fuel Monday to a two-week-old advance, cheering the government's plan to help banks remove bad assets from their books and also welcoming a report showing a surprising increase in home sales.

 

Provided there were actually investors who made the decision to invest today on the news of the Administration's bad asset cleanup plan (i.e. provided the reporter isn't just making this up) this is certainly more than a correlation.

[Pangloss]

I don't think the Dow "knows all", but it is up 20% over the last two weeks. New housing starts are up 5.1% on new numbers today, and the prime rate is as low as it's ever been. Lots of people on Wall Street are talking about "the light at the end of the tunnel".

 

We'll see what actually happens, of course, but I think this underscores that there are no absolutes or certainties in economics.

[iNow]

I think this underscores that there are no absolutes or certainties in economics.

 

That's just an empty platitude. I can give examples which prove it false if you'd like.

[Pangloss]

Well let me be more specific, then. I think that those who were saying that it's impossible for Obama's plan to turn around in the economy because the approach itself has been proven flawed by "Nobel Prize Winning Economists" have been dealt a blow with various upswing reports today.

 

But I do recognize that we're not there yet.

[jackson33]

Lets try and keep this is perspective; NEW HOME sales are down -4.45% in Feb. compared to a year ago...

 

Existing Home Sales ARE up 5.1% in February, but the value of those homes dropped to 165,400, -4.6% from the previous year and at multi year lows.

 

http://www.google.com/hostednews/afp/article/ALeqM5jy2JudjFnPeoNaRHhdcKTFjUQtjA

 

 

It's my understanding, Congress will buy up to a $1T of FDIC 'said' toxic paper, allowing the FDIC to back investors in the purchase of notes held by member Banks.

 

I had two pending offers for existing homes last week and have been put on hold, while FDIC details are being worked out.

 

Under my offer, all cash, those two homes which the Bank was originally satisfied with the, established a premature bottom to myself. My local Bank manager believes FDIC, is going to value those two homes at the value of their paper or what was owed when defaulted. My offer was 150k on two homes I estimated last sold for 300k, probably near what the bank has invested. What FDIC is proposing is I could advance as little as 18k (6%), they would do the same and back my loan up to the estimated 300k. Of course, there is no way I would agree to that or any investor. IMO, it's simple manipulation of a market, in the hopes long range investors will hold their end up, pay the taxes, maintenance, keep rented or any obligation involved and at the end of the agreement (not defined, but possibly up to 20 years) split any capital gains and I would bet pay additional PG taxes on my part, on any sale over 300k. This makes absolutely no sense IMO....

 

As for my referendum on OBAMA POLICY, I stand my the premise and is agreed with by many. In part the markets dropped as policies were being announced. It would be in my interest, to be completely wrong as both an investor and day trader in the markets. I will say again; China is the giant in todays economy, both as producer and consumer after only the US and all DOW components have a stake in China. Their 9% 2008 GDP was up 9%, while their markets (Hong Kong) plunged 50%, but has increased 35% in the past month.

 

http://news.xinhuanet.com/english/2009-01/22/content_10700833.htm

[bascule]

As for my referendum on OBAMA POLICY, I stand my the premise and is agreed with by many. In part the markets dropped as policies were being announced.

 

What are you referring to specifically?

 

Yesterday we had a specific event where policy was announced and, according to the reporter, investors reacted positively to that policy. Subsequently, the Dow went up 500 points.

 

Are you willing to give Obama's administration any kudos here, or do you just want to chide them when when things don't go well?

[jackson33]

What are you referring to specifically?

 

Yesterday we had a specific event where policy was announced and, according to the reporter, investors reacted positively to that policy. Subsequently, the Dow went up 500 points.

 

Are you willing to give Obama's administration any kudos here, or do you just want to chide them when when things don't go well?

 

The DOW, is hyper sensitive to the financial sector in the first place and every Obama Policy move effects this one sector. If your interested, check out the list, noting GM, GE and others are knee deep in financing along with the five or so pure financial. I'd go through the weights of each with regards to effecting the total DOW, but I don't think your interested...Point in fact what it took to drive the DOW down from 14k to 10k is a mild fraction of what's involved from 10k to below 7k.

 

http://money.cnn.com/data/dow30/

 

Todays last half hour and the drop from -50 to -115 or so in the last few minutes, was a pure play on what tonights Obama Press Conference will mean to tomorrows opening. Thats just the way it is and has nothing to do with my opinions of OBAMA POLICY, markets don't follow my opinion but a collective of millions. In fact if it opens higher, then my todays last minute purchase of GE, will pay off.

 

As for the 500 point increase, I do give credit to Bernanke, who has been making more sense than most anyone lately. I also think he is advising Geithner, along with other members of the Federal Reserve. Obama himself is a non factor, IMO. He has never managed anything, certainly not a business, probably never owned a share of anything and thinks P/E has something to do with PROFITS. I also happen to believe or my opinion, that Emanuel, possibly with Axlerod have more to do with policy than Obama and feel Obama is pursueing some long held beliefs about a living US Constitution, with perceived errors in democracy (by the people) over the intent of representation from those people.

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Well let me be more specific, then. I think that those who were saying that it's impossible for Obama's plan to turn around in the economy because the approach itself has been proven flawed by "Nobel Prize Winning Economists" have been dealt a blow with various upswing reports today.

 

But I do recognize that we're not there yet.

 

You covered both sides; We are in a trading range, where breaking below 6600 or over 9000 will have meaning. Most economist (not sure NP winners) are more concerned with pending inflation, artificial bottoms and massive government intrusion into an economical structure, US and/or world, which could easily lead to a depression or certainly a long period of recession (1979-83). They realize Federal Actions today are replays of recently failed attempts to stimulate, not those in 1930-39. IMO

 

http://moneycentral.msn.com/investor/charts/chartdl.aspx?D4=1&ViewType=0&D5=0&CE=0&ShowChtBt=Refresh+Chart&DateRangeForm=1&ComparisonsForm=1&D3=0&Symbol=%24INDU&C9=0&DisplayForm=1&CP=0&PT=5