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Mick Weinstein The Week's Best Stock Blogs

Mick Weinstein, The Week's Best Stock Blogs

Amid a 'Write-Down Rally,' Helicopter Ben Goes to Washington

by Mick Weinstein

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Posted on Friday, April 4, 2008, 12:00AM
The market took a strong turn for the better this week, with a huge 391-point Dow rally on Tuesday that left bloggers cautiously optimistic. This morning's bleak March jobs data notwithstanding, could conditions be improving?

Market Upswing: Is the Worst Priced In?

WSJ's David Gaffen dubbed Tuesday's surge "the Write-Down Rally," as it was a surprising response to a huge $19 billion UBS write-off of illiquid real estate assets: "Investors are engaging in a familiar game buying shares of equities, particularly financial stocks, on the hope that the worst news has been accounted for in current share valuations."

Gaffen believes the flat days on Wednesday and Thursday may further bolster investor sentiment: "Simply holding firm might be enough to convince some investors that the 'it's all good' attitude that held sway for much of 2007 is on the rise again."

Trader Charles Kirk was caught somewhat off balance by this week's big move: "As someone who has been focused on defense and capital preservation, I have to admit the Fed sure isn't making it easy to stay that way. With money market rates well under the rate of inflation ... I must not be the only idiot out there who sees few options but to buy stocks again. After all, that's the Fed's master plan all along, correct?"

In the wake of this week's move, its rare to see so many indicators pointing up, says investment advisor Jordan Kahn. True, we've seen conditions reverse quickly in recent months, but if this continues, it would bode very well for the market in the near-term."

Money manager Chad Brand is optimistic, but doesn't think we're completely out of the woods, or that the market will soar from here. In fact, Brand predicts the market will be range-bound for the foreseeable future.

Bruce Zaro of Delta Global Advisors: "Even if we're all a little punch-drunk from the market's directional changes, a close look ... now shows a pattern of recovery. I see the market strengthening and its bounce from the bottom accelerating."

Interpreting this week's market action is entirely a matter of perspective, says Contrahour. If you're bullish, there's been a recession for six months that could be coming to an end already. If you're bearish, the current rally can simply be viewed as an unwind of the bets made by leveraged hedge funds.

Bernanke on the Defensive

Fed Chairman Ben Bernanke ventured to Capitol Hill on Wednesday, where he acknowledged before a congressional committee that the U.S. economy should remain soft for the near term.

Barry Rithotz provides the key takeaways from Bernanke's testimony. WSJ.com's "Real Time Economics" blog collected a "greatest hits" from the session -- don't miss Sen. Edward Kennedy getting hot under the collar as he fails to get Bernanke to cough up a position on how Congress should help homeowners.

Currency expert Kathy Lien was disturbed that Bernanke practically relegated inflation to an afterthought.

For Herb Greenberg, the most interesting part of the testimony was Bernanke's comment that the Bear Stearns deal had to be completed before the Asian markets opened that Sunday: "If nothing else, [Bernanke] pretty much confirmed what we already knew: The dog (as in the market) is wagging the tail (as in the economy), so the Fed fears the market more than the economy."

But economist John Mason defended the central banker: "We must continually realize that there is only so much a central bank can do." A central bank, says Mason, "needs to 'keep its powder dry' so that it can act when that firepower is really needed. If it is always chasing the latest statistic or piece of market psychology then it will not be as effective...."

Quick Takes for Investors

The first quarter of 2008 came to a close this week and, well, it was downright ugly for stocks. See helpful Q1 summaries from Bespoke Investment Group, Roger Nusbaum, and analyst Alan Brochstein.

Is gold's big run over? Eddie Elfenbein, who believes the yellow metal was in an artificial price bubble, believes it very well may be, while Bill Cara says "the closer the market takes the price of gold to $770 and silver to $14, the more interested I am in moving from cash to precious metal bullion and goldminer stocks."

But MSN Money has some precious metals fund managers claiming gold's headed to $1,500 an ounce, and Prieur du Plessis found someone willing to bet a million bucks that gold's headed to $1,650 in the next three years -- any takers?

Amazon may be facing lower e-commerce spending, but TechCrunch's Duncan Riley believes its new text-message buying service could undermine brick-and-mortar retailers: "Expect to see people texting Amazon from a store near you in the coming months."

Yesterday, New York Fed president Tim Geithner shed light on what assets the Fed is financing as part of JPMorgan's acquisition of Bear Stearns. There are insightful responses to this from Felix Salmon and Steve Waldman.

Finally, in exchange traded fund news, there are new ETF offerings in nuclear energy and tech, the first "real" Israel ETF, and an "all world" ETF.

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25 Comments

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  • 梅業明 梅 - Friday, April 4, 2008, 11:52PM ET  Report Abuse

    • Overall: 3/5

    Nice April Fool's joke. Gold prices move up makes no sense. People will cash their gold and put in stocks again. Think about a typical investor's portfolio. The percentage of a person holding stocks bound to be more than holding gold. By supply and demand, people will have to cash out their gold into something else low priced value. Thus, prices will drop. Also, economy will back to good time again. Also, unlike oil, gold has very little use of it. I would rather hold oil than gold.

  • Mister T - Friday, April 4, 2008, 10:46PM ET  Report Abuse

    • Overall: 1/5

    No original thoughts, just quoting a bunch of people I have never heard of. The Fed always overshoots with their regimens of rate hikes and rate decreases. It would take 3-6 months for any rate change to ripple through the economy. Instead, they raised rates too much and too fast, and now they have been back-peddling like crazy with too many rate cuts too fast. They use their rate changes more for show and politics than for true economic impact. I hope all you sub-prime borrowers lose your homes when your rates adjust and you can't afford your payments. I have no sympathy for you. You should read what you sign, and if you get into a house you know darn well you can't afford then you should already be suspicious. Don't act as if you are an innocent victim and that you deserve the government's help. That's the problem with this country, too much of an entitlement mentality and not enough accountability. All you bleeding heart liberals are calling for the government to bail people out. How about we reduce taxes and reduce the size of our bureaucratic juggernaut of a government? Then maybe if we all didn't have to pay so much in taxes we could actually have more money to spend and boost the economy that way? What a novel concept, huh? But no, instead, let's tax the heck outta everyone and let the government, in its infinite wisdom, decide how to redistribute the wealth or just waste it all together.

  • SandyLady - Friday, April 4, 2008, 9:13PM ET  Report Abuse

    • Overall: 2/5

    Who do you believe? Forget 99.9% of these talking heads. The last expert moron I heard on CNN said that this "supposed" recession is all in our minds! Yep, we're all making this up! Tell that to the people who are losing their homes, their paycheck is shrinking, their job is in jeopardy, they're worried about how to pay the bills, and its a decision between gas for the car and hamburger for dinner....but its all in our collective minds! Mr. Bernake dares not to utter the "R" word because THEN it becomes real, and factual, and something we have to deal with, but as long as we don't talk it about it, this bad stuff will all just fade away. One more example from self centered idiots we have governing this country. They are selling this "no recession" story so that we don't panic, don't worry, keep spending our worthless dollars while our country goes spiraling downward; these clowns no doubt are already packing their bags for a permanent getaway. The prudent amonst us knows a pig when we see it, and this my friends is one big mean recessive PIG that's not going away anytime soon.

  • Richard - Friday, April 4, 2008, 8:06PM ET  Report Abuse

    • Overall: 3/5

    the commodities rally will continue until the Fed changes policy and strengthens the dollar, which is not apparent as a policy going forward at this time. i expect $120 oil by July 4th and $1,200 gold by years end. our recovery will be painfully slow as the consumer is dogged by increasing food, fuel and inflationary prices for all goods. the average joe is just plain tapped out and those that are not are tightening their spending to avoid what has happened to others. the American consumer is no longer the drunken spender we have been so dependent upon for economic growth. this time, it is going to be different.

  • g.kenner - Friday, April 4, 2008, 7:17PM ET  Report Abuse

    • Overall: 3/5

    When the comments are as good as the article, it says a lot about the newpaperman that wrote it. Being in the Mortgage Industry for 18 years and seeing the games that are being played in this market is only making things worse. At least in California you can not longer get a stated income loan no matter how much equity you have. This type of lending policy will slow the market even more and drive more people out of their homes. A few months ago I heard Obama got a stated income loan, so today, even our Senators are not credit worthy. I know they (the fed) were meeting with BEAR STERNS on the weekend , well i hope they are meeting with Fannie Mae over the weekend, If they are not I predict that housing will throw us past a difficult financial time and into a real depression, graphs charts and curves will not mean much to anyone. Ronald Reagan is quoted as saying " A ressession is when your friend is out of work a depression is when your out of work!. Put us back to work and let the mortgage industry make some common sence loans, remember the old bankers rule "Equity Over Comes ALL OBJECTIONS" for all other loans there is FHA , fully documented and insured loans.

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