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Where Do We Go From Here?
“Each crisis has its unique features. The nature of shock, the object of speculation, the form of credit expansion, the ingenuity of swindlers, and the nature of incident that touches off the revulsion. The more something changes, the more it remains the same. Details proliferate; structure abides”

Charles Kindleberger, Manias, Panics & Crashes:
A History of Financial Crises (1978)

See the full PDF version of this month's commentary as well as the archive in our Market Info Section.
We’ve seen a stellar advance in equity markets around the world. This has been ignited in large part by recent announcements by the US Federal Reserve, US Treasury Secretary Tim Geithner and improving economic data. The market environment remains vulnerable to say the very least. It is vulnerable to negative surprises by way of economic news. On the flip side, when you have such an “anxious” market you will see surges to the upside on positive surprises. Here is a recap of top events that have spurred on March’s bear market rally:
  • Week of March 2nd ‐ 6th: China announces that their stimulus is working, but rumors begin that they will announce a further stimulus package. This is viewed positively by the commodity markets as China’s continued expansion will see a demand for base metals, oil, steel, etc.
  • Week of March 9th ‐ 13th:
    Bank Executives, including JPMorgan CEO Jamie Dimon, Bank of America CEO Ken Lewis and Citigroup CEO Vikram Pandit, stated their companies were profitable through the first two months of 2009 and would not require further capital injections from the government. The financial sector applauded these statements and charged higher.
  • Week of March 16th ‐ 20th:
    The US Federal Reserve took bold action by announcing they will buy Treasuries outright in the market. This was furthered by a sharp expansion in mortgage and agency paper support. The markets accelerated as this is seen as creating inflation down the road with the US continuing to increase their money supply. The USD fell, commodities and gold rallied – more on this later.
  • Week of March 23rd ‐ 27th:
    Treasury Secretary Tim Geithner announced the Toxic Asset Plan, which the details were encouraging for the financial sector. In addition, new home sales and factory orders data were the recent string of improving economic indicators driving the market support.

    • OUR ANALYSIS

    The good news is the markets are beginning to repair themselves. We need this rally to continue to repair the damage done in the markets. This rally has taken place right off of the November 21st support, and we can be thankful for now that we did not have a break down to new lows in Canada; as was the case in the USA. As you know, with our strategy we do not try and buy the bottom in the market and it has been proven to be a mugs game and most everyone who has tried to do this in the last eight months has learned this lesson the hard way. Although we have the markets moving higher over the past three weeks based on positive news bites; we have seen limited institutional buying coming back into the market. In fact, as the market have rallied it’s being done on decreasing buy volume, which makes the rally suspect. However, this could change quickly and we could see institutions start to strongly accumulate stock. If this happens then we will be quick to act!

    Sincerely,
    Clinton & David
    The Friesen Group

 

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