A double bubble

Major profit-taking in the bank stocks rolled over into the broad-based market on Friday resulting in a lower close. The better news is that we still finished up for the week. This gave us our first back-to-back up weeks in almost a year.

The major indexes were all lower at Friday’s close. The Dow Jones posted a drop of 122 points to finish at 7278. The S&P 500 moved back to 768. The NASDAQ was last traded at 1457.
Oil ended the week at $52. Gold was $5 lower Friday to end the week at $953/oz.

The Federal Reserve chairman spoke to a banker’s convention Friday. He offered no new insights into monetary policy. He said that the bank has been encouraged by the response to this lending programs.

One challenge to establishing additional liquidity has been the use of the Term Asset Backed Loan Facility (TALF). It was funded with $200 billion to assist the private sector in buying loans backed by cars, credit card receivables, student loans and SBA loans. Only 4 deals worth under $5 billion have been done so far.

The big problem, according to many money managers, is the recent actions of the administration and Congress. The consensus is building that a contract with the Federal government is no contract at all. The managers feel that these guys will change the rules as they go along so there is a great hesitation to commit any funds.

In spite of the mind-numbing ineptitude of this government, the market continues to be in a position for further moves upward. We’ve had 11 recessions since WWII and we’ve recovered from every one.

This time will be no different.