Sunday, November 09, 2008

Stimulus Abounds

Top Line: The Friday unemployment report looked mighty bad but it was expected. Our last post had a title that said to buy the report. So far, that was good advice. More upside this week.

The stock market handed out a few ulcers the past couple of weeks with huge swings in prices. As we looked at the drop going into Thursday's close, we noticed that the market had not really challenged its lows of October. With the worst jobs' report expected on Friday, the market sold off hard on Thursday but failed to scare too many out of their positions. Strong hands holding stocks these days?

The big news this evening is the Asian moves. China announced an economic stimulus package and Taiwan cut interest rates for the fourth time in about a month. In case you didn't notice the governments and central banks of the world are doing all they can to stimulate the global economy.

These efforts will continue to push up the stock markets of the world. Tonight, the Chinese stock market has jumped 5% and, meanwhile, Japan is up nearly 6%. Of course, the US futures market couldn't be left out and is trading up about 3% to fair value this evening, too. Monday could prove to be a stunning global rally.

We just noticed that there is some big news this evening here in the US, that of the government changing the AIG aid package. The terms of the original $123 billion package were onerous for AIG and are being renegotiated. The New Deal (sorry) is going to be $150 billion (we think that means $27 billion more?) but comes with much better terms. Both deals allow the government to take over at least part of the company.

Along with this announcement is the efforts to provide funds to the auto industry. The country is worried that the industry collapse would cause major economic stress due to the number of people employed by the industry. They cite a number of 10% of all those employed work in the auto industry in some capacity.

We leave you this evening with an article from Gretchen Morgenson of the NY Times. This article is some more nuts and bolts of the financial collapse, focusing on the fall of Merrill Lynch.

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