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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (49786)	5/8/2009 5:16:54 AM
From: energyplay	1 Recommendation Read Replies (4) \| Respond to of 218108

Think happy thoughts - from the FT.com - What a feeling: how emotions may yet save the economy By Chrystia Freeland Published: May 7 2009 20:35 \| Last updated: May 7 2009 20:35 An influential Democrat who was also one of the world’s top-ten, highest-paid hedge fund managers last year thinks he knows which book is at the top of the White House reading list this spring: Animal Spirits, the powerful new blast of behavioural economics from Nobel prize-winner George Akerlof and Yale economist Robert Shiller. Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline. EDITOR’S CHOICE Q&A: Stress test jargon explained - May-07Banks turn to markets in effort to plug holes - May-08BofA aims for $34bn in fresh capital - May-08Morgan offers $2bn in common stock - May-07Stress tests separate sick from healthy - May-08Doubts on banks’ ability to sell assets - May-08Since mid-March President Barack Obama and his team have mounted a sophisticated effort to brighten those “ideas and feelings”, reassuring the nation with “glimmers of hope across the economy” and the assertion that “we’re starting to see progress”. The much bally-hooed stress tests – whose comprehensively leaked results were due to be fully unveiled after the markets closed on Thursday – are both an important example of this confidence-building campaign and its toughest challenge. The sunnier rhetoric of recent weeks marked a sharp shift both from the bleak mood of the fin de regime administration of George W. Bush and from the first weeks of the Obama White House. The outgoing president’s political capital was so low in his final months in office that the mere fact of his public appearances seemed to have a depressing effect on the markets. His secretary of the Treasury, Hank Paulson, enjoyed greater confidence, but he needed to convince lawmakers the situation was dire enough to merit his $700bn Tarp programme. Likewise, Mr Obama needed the nation to be worried enough about the economy to pass his nearly $800bn stimulus plan. And too much good cheer in the first days of his administration could have wasted one of his most powerful trump cards – the country’s belief that this recession is owned by president number 43, not number 44. But once the stimulus bill was passed, the White House calculated that, as Mr Obama told the Financial Times, lawmakers and US voters had reached their limits. No new money to rev up the economy or revive the banks would be forthcoming until the president and his team could demonstrate concrete results from the first instalment. Since then Americans have been hearing a decidedly more optimistic vibe from Washington. It has seemed to work. A Google search for the term “economic recovery” turned up 6,991 references to the term in January and 7,831 in February. In the first week of May the phrase occurred 24,443 times. More traditional yardsticks show the same result. According to a recent ABC/Washington Post poll, Americans’ belief that their country is heading in the right direction has soared from 19 per cent, just before Mr Obama’s inauguration, to 50 per cent, the highest in six years. In what could be a textbook example of behavioural economics, the stock market has followed the same curve, recovering from what rightwing commentators were calling “the Obama bear market” at the beginning of the year to a healthy rally. Thursday night’s verdict on banks’ balance sheets will also be a stress test of the administration’s experiment in behavioural economics. Washington has clearly learned the lesson of one of its rare, early failures. In contrast with the disastrous media management of Treasury secretary Tim Geithner’s maiden economic speech, the results of the stress tests have been so thoroughly previewed that by Thursday financial pundits and punters seemed almost bored with the exercise. Ennui is not the same thing as conviction – one of America’s biggest money managers on Thursday described the exercise to me as “the feather tests” and it is hard to find anyone who doesn’t work for the government, or one of the banks, who believes the tests have been rigorous. But, like Washington, Wall Street really does want the scheme to work and the markets to recover. Over the next few weeks the administration will be hoping those feelings are powerful enough to drive the economic data. Copyright The Financial Times Limited 2009

To: Haim R. Branisteanu who wrote (49786)	5/8/2009 6:32:58 AM
From: elmatador	Read Replies (1) \| Respond to of 218108

Green Shoots in emerging markets. Greatest Depression OECD. There is going to be many trying an Orgasm with Emerging mmarkets erection. Happy days are here again May 7th 2009 From The Economist print edition Investors’ optimism has returned very quickly. Too quickly MOST students suffer from pre-exam nerves. But the financial markets were remarkably sanguine ahead of the results of the stress tests of American banks (published after The Economist went to press). By the close of trading on May 4th, the S&P 500 index had regained all the losses it suffered earlier in the year. Financial stocks have in fact been rallying ever since March, when Citigroup hinted that its trading performance in the first quarter had been better than expected. That optimism was borne out in other banks, albeit with the help of some one-off factors that may have overstated the underlying recovery in their finances. Big losses on commercial property and consumer debt are still to come. Nevertheless, the system has come a long way since the meltdown of last autumn. That view is supported by the credit markets. The number of American banks tightening lending standards in the consumer and corporate-loan markets has fallen for two consecutive quarters. The three-month London Interbank Offered Rate (the price banks pay for borrowing in the money markets) has fallen below 1% for dollar loans, having been almost 5% in the autumn. Investors in high-yield bonds, the riskiest form of corporate debt, enjoyed returns of 11.5% in April. In short, there seems to have been a huge shift in attitudes towards risky assets. That can be seen at the sectoral level as well as in the overall market. The rally has been led by cyclical stocks, those that are most dependent on economic growth. By the end of April mining, automobile, engineering and general-retail stocks were all up on the end of 2008, whereas defensive sectors such as food producers, pharmaceuticals and utilities were down. This economic optimism has largely been justified by the data, notably by the purchasing managers’ surveys of both manufacturing and services. In truth, the data suggest only that the economy is contracting at a slower pace than before. Nevertheless, the figures seem to point to a deepish recession, rather than the rerun of the Depression that was feared a few months ago. All told, this looks like a conventional rally from the depths of a recession. Stockmarkets usually advance before a downturn is over, anticipating the recovery in profits to come. Optimists point to America’s first-quarter results, in which 66% of reporting companies beat expectations, according to HSBC. The trouble with this picture is that it all seems too neat. Bear markets are normally pitted with some vigorous rallies, as investors in Japan have discovered over the past 20 years. Often these rallies result from the technical position of investors, and this may be another example. After their battering in 2008, many hedge funds entered the year either betting against the market (going short) or holding large cash positions. As the market has rallied, those funds have had to chase it higher, thereby giving the rebound stronger impetus. The economic data may have improved, but only from some terrible lows. It would have been amazing, given the amount of stimulus thrown at the economy in the form of lower oil prices and interest rates, quantitative easing and fiscal deficits, if there had not been some kind of rebound. Nevertheless, an observer who had woken after sleeping for the past two years, would be alarmed at the numbers. Nominal GDP in America has fallen for two consecutive quarters for the first time in more than half a century. Industrial production is still dropping at a double-digit annual rate in America, the euro zone and much of Latin America and South-East Asia. Companies are still defaulting on their debts at a steady rate; 40 issuers did so in April and Moody’s expects the default rate to reach 14.3% by next March. Even the results season has been mixed. Andrew Lapthorne at Société Générale points out that 62% of American companies have missed expectations for sales. That implies the profit improvement is coming from higher margins, something that it is hard to believe can persist given the economic backdrop. The danger is that sentiment has flickered higher rather as a dissected frog’s leg will twitch when an electric current is applied. The world is still drowning in debt, unemployment is still rising, wages are stagnant and the threat of higher taxes hangs over consumers. This was not a conventional downturn; it is unlikely to herald a conventional recovery. Award: Philip Coggan, our Buttonwood columnist, won the title of Senior Financial Journalist of the Year at the Harold Wincott Press Association Awards for 2008