Saturday, May 09, 2009

Inflection point

I am sure many are laughing their way to the bank the past few days.

The quoted $75 billion shortfall in bank capital and half a million job losses - as a sign of weakness for the economy, had been shunned by investors. Stock market is up and up the past few weeks.

After the panic selling last year, and being down the first two months this year - many thinks, and perceived the economic recovery is not just in the horizon, but already is in the air.

I guess, perceptions, is very important, indeed. But I would still tread very carefully.

If the nonfarm payrolls improves next month, then it is great sign that maybe the downturn is over. Or is it?

But certainly not as worse as last year?

What about the stress test, how stringent were they? I hope nobody shares my suspicion that it was not so strict. I mean do you believe that, only $75 billion shortfall are needed by banks?

Let me quote a different report/news:

In its global financial security report, the IMF estimates that financial companies could write down an estimated $2.7 trillion in loans and securities that originated in the U.S. Between 2007 and 2010. That's up from the fund's $2.2 trillion estimate made in January, and $1.4 trillion in October.

My points are:

1. Indeed, there is nowhere to go but up.
2. Signs maybe there - but the herd are not comforted yet. Maybe the worse is yet to come.
3. If the stress test, as I suspected, show some "problems" later, a pandemonium could occur.

Watch your back.