Two Panic Rallies In One Decade—Coincidence?
It has been a while since I could guage the breadth and depth of this rally. There are a couple of things I will never forget, one is when the President of the United States of America says stocks look reasonably priced and now might be a good time to buy them—listen. The other is the panic that led to the demise of the stock market this year was very similar to September 11th, 2001 stock rally. After coming out of a hole in 2001 with the stock markets crashing and down with the World Trade Center, effectively stopping trading for four days, we sold off hard. The accompanying rally took the Dow jones Industrial Average from 7750 to 10,500 in six months. During the fall of 2001 we also had Enron and Worldcom go bankrupt, as well as Dennis Kozlowski of Tyco playing the role of public enemy number one.
In 2009 we have made a another major market move to 6500 on the Dow with a two and a half month recovery back to 8500. Rallying out of the panic selling and hopeful of long term recovery, we see Chrysler going bankrupt and probably GM June 1st. Bernard Madoff was premature to the party, however both the auto companies would have gone bankrupt under Bush if it were not for the TARP money they received in December. So the question is where do we go from here? I think it is a race between keeping sentiment up long enough to actually show economic growth. However, I often remind myself hope is not an investment strategy. Beware, zero interest rates make it attractive to invest. But being a practical man I need one bit of uptick news in a global economy. For me that is transportation needing to increase. Sentiment is now bullish in the newspapers, credit is flowing, and the rate of decline is slowing. The problems are foreclosures ramping up after moratoriums were lifted in the spring, job losses mounting from a vertically integrated automotive industry, and rail traffic is off again this week. According to the Association of American Railroads, May 14th, 2009 was another down week for Rail Freight Traffic from a year ago during the week ended May 9th. If you don’t believe me then look for yourself. http://www.aar.org/NewsAndEvents/PressReleases/2009/05_WTR/051409_Traffic.aspx
"Greg Gilbert and James Simos" are registered representatives of FINRA member firm, "Infinity Financial Services."
