Monday, October 13, 2008

Wow, How 'Bout That Dow

Traders worldwide simultaneously reached liftoff today when the Dow rocketed up in its all-time largest one-day gain. Traders were definitely reacting to the G7 action plan crafted this weekend. Tomorrow is just as likely to see huge index gains as traders anticipate the announcement of TARP purchases of banks' equity, not to mention expanded FDIC insurance.

Does this mean the bear market is over? No way.

"The stock market is a voting machine in the short run and a weighing machine in the long run." The wisdom of Benjamin Graham is useful at times like this.

Panicky traders are voting on short-term liquidity measures, but the market's long-term prospects will be weighed down by declining corporate earnings. Today GE announced a 22% drop in quarterly earnings. Several major banks and corporations will announce 3Q earnings this week, and IMHO the results will not be pretty. Too many people who should know better are still hoping for a V-shaped recession.

I'm still bearish, and I plan to stay that way through 2009.