Monday, March 16, 2009

Another sucker's rally.

Not much to be said, really. Citi purposely released a fake "internal memo" claiming they will be profitable, and so now we have another sucker's rally. BAC also lied by saying it won't need any additional capital.

Of course these banks will show operating profits! Taxpayers are eating all their losses, and they are borrowing money at taxpayer subsidized rates of almost 0% and then lending it out at 6% or more. There is no way to lose money on that. But who cares about operating profits? How about bottom line profits? These banks are still going to have $10 billion write-downs.

Nouriel Roubini warned the other day that there would likely be another sucker's rally sometime in Q2 and Q3 as we see temporary effects from the stimulus which makes people think the economy has turned the corner. I wish I'd gotten around to posting on that. This whole market has pretty predicatble movements now. Suckers throw their money away paying too much for terrible companies, then earnings season comes in and destroys them. The stock market falls 30%. Then earnings season is over and everyone gets optimistic again and pays too much. Then earnings season comes again and slaps them in the face.

There is nothing we can do but sit here and watch people lose money overpaying for stocks. BRK lost its AAA rating and the stock went up. GE lost its AAA rating and rallied 10% in a day. We're back to silly season again in the market. Remember a few months ago when we were getting 3-5 horrendous economic reports per day and the market would rally 4% anyway? We're doing that again.

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