Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand.”     Milton Friedman

June 26, 2009

Where Is This Rally Headed?

by Brad Warbiany

As I’ve mentioned before, I sometimes question my allegiance to the belief that we’re in the midst of a bear market rally. Part of this is due to the constant media affinity for “green shoots”, and the fact that in many ways, the “second derivative” is actually improving…

But I don’t think the fundamentals are really there, given the financial debt/credit fueled nature of the boom that led to this.

So, it brings a question. Is there historical basis for a rally extending this long after a major shock? And I’d say yes:

chartoftheday20090626

At least one data point on that chart is up and to the right of the current rally. “But that’s only one point!” Yes, it is. It also bears one similarity to the current point — it was the first rally after the initial crash.

I think there’s more to come. And with every new day government encroachment on the market, I become more and more sure of that fact.

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2 Comments

  1. Brad, if you really want to be scared shitless, take a look at this link http://www.usdebtclock.org/

    Comment by Stephen Littau — June 26, 2009 @ 2:48 pm
  2. The only problem with this rally is the massive amount of Fed and Treasury money involved, we didn’t have that in 1929. This market has yet to be allowed to touch bottom and it will of its own force at some point, be it by the end of the summer, year, decade… As you say, the fundamentals aren’t there, in fact I think they’re horrible.

    Some troubling signs for me have been; massive insider selling into the rally, notices of foreclosure in prime loans escalating, massive overcapacity in manufacturing, commercial real estate…, household savings rising, household income dropping, energy prices rising, pension funds obliterate, 19 states rushing up behind California at the edge of the debt/bankruptcy cliff, banks… There really hasn’t been much good news, it has simply been spun well with memories of recent recessions giving people hope this will be the same.

    I still think between now and the end of the year the Dow heads towards 6000 looking for the bottom, let’s hope it finds it, and then levels out for a year or two. If it doesn’t, it continues to rally, it will be because TPTB were able to blow up another bubble and then god help us when it pops.

    Comment by SWilliams — June 27, 2009 @ 5:03 pm

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