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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
March 30, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata Financial
Last week, details of Treasury Secretary
Geithner’s Public/Private Partnership Investment Program (PPIP) were
revealed before the market opened Monday morning. This is potentially good
news for the banks as new entities will be created (owned 50% public/50%
private) that will be able to bid more aggressively for the bank’s
legacy (toxic) assets and still provide the same returns to investors, possible by the magic of leverage (up
to 6 to 1) and low cost of borrowed funds (from the FDIC). While it is true
that half of these new entities will be owned by us, the taxpayers, and we
will share in any upside, the downside is pretty much ours. This program can only be a panacea if
the new higher bids these new entities will offer are accepted by the banks,
a big leap. The market celebrated the plan’s release with a big jump
Monday as shorts ran for the hills (after reports showed they had pressed
their bets an additional 10% earlier in the month) and levels of uncertainty
about the future and Geithner were reduced. The fundamentals were net
positive this week, for a change. Congress wheeled the AIG guillotine back
into storage as the President signaled that there were better ways to handle
this situation. A better than
expected durable goods report, better than expected earnings from retailers
Nordstrom (JWN) and Best Buy (BBY), coupled with better news from the homebuilding
sector (KB Homes[KBH]) outweighed a final GDP report for Q4 of -6.3%
(annualized). Unemployment was still bad, but stabilizing. Senator Arlen
Specter’s (R-PA) decision to avoid a primary battle with conservative Republicans
and support the fight against the union’s card check bill also provided
support. Negatively, it was the last week of the quarter and I have commented
previously on the “window dressing” that sometimes takes place,
which artificially pumps up prices the last week of the quarter (month) only
to be given back shortly thereafter. Technically, though, a pullback would be
healthy as we need to establish a “higher” low on the charts,
preferably at around SPY75, which would be half way back to our lows. Techs
and retailers continue to lead as gold’s retreat hurt relative
performance this week. Conclusion: While the bulls have run the last three
weeks, decisions must be made looking forward. I need more convincing on the
technical side before hitting the gas. A modest retreat and then a push above
SPY82 would do the trick.
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