Shortly after the bubble burst, the Federal Reserve took interest rates down to historical levels. Fueled by cheap money, the massive bubble was caused by combination of excessive speculation, and corporate and investor greed.
The above comments came shortly after the NASDAQ bubble burst in 2000. Sound similar to today?
If you have watched the boom and bust cycles for any length of time, you'll see that the culprits of every crisis are always the same. In short, it's Wall Street. They're always in the middle, and always cooking up the next crisis. Period.
After hitting a 12-year low on Monday, March 9, the rally since has most believing that the crisis is far from over. In reality, the market is showing flickers of stabilization, but many will not believe it until prices are much higher.
After a 20% rally in only eight days, the market spent a little time digesting those gains, and the bears spent the time trying to muster more fear. Fear and concern during a market rally is actually good news, and this type of concern is just what the market needs to leap to higher levels.
The recent good news and strength of financial stocks will not be fully realized until prices are much higher. Investors will be reluctant to buy on pullbacks fearing that any rally is nothing more than a head fake. With investor sentiment firmly entrenched in depression, cash on the sidelines is looking for somewhere to go. I believe the market will continue to stair step higher to a new level.
As we get into the late summer, we could see the DJIA back around the 10,000 mark.
Here are our Top 10 ETF's for the week of March 23rd:
1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) VIS: Vanguard Industrials
6) DDM: Ultra Dow 30 Proshares ETF
7) IXP: iShares S&P Global Telecom
8) IYF: iShares Dow Jones US Financial Sector
9) PGJ: PS Golden Dragon China Fund
10) SSO: ProShares Ultra S&P500 Trust
Here are our Top 10 Fidelity Sector Funds for March 2009
1) FBIOX: Biotechnology
2) FSPTX: Technology Portfolio
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSCPX: Consumer Discretionary
6) FSCSX: Computers & Software
7) FSCHX: Chemicals
8) FNARX: Natural Resources
9) FSENX: Energy
10) FSRBX: Banking
For the Week:
Today, Treasury Secretary Tim Geithner unveiled a plan to remove toxic assets from bank balance sheets. The Treasury said it will finance as much as $1 trillion in purchases of distressed assets to help repair the financial system. So far, the markets like what they hear.
The big news last week was the Federal Reserve's move to buy bonds to jump start the economy. This move was an effort to keep interest rates low so consumers could refinance their debt and mortgages. This move caused the dollar to decline, and drive commodity prices higher.
As the dollar declined, oil prices leaped higher, now above $50/bbl.
So, when the government says they have a lot of tools to fix the economy, I guess they mean that illusions are included. They way I see it is they issue debt, and then turnaround and buy it. What a neat trick!
At this point, I guess whatever works is fine, but clearly there will be a price to pay down the road.
Congress grilled the CEO of AIG on the $165 million in bonuses paid to employees. The politicians aren't saying anything about the $858 million paid to the Merrill Lynch gang, and haven't mentioned that Fannie Mae & Freddie Mac are still paying bonuses to their executives.
Economic News
The February Consumer Price Index (CPI) rose 0.4% mainly because of an 8.3% rebound in gasoline prices. Since the core CPI excludes foods and energy, crude oil's recent 0.2% was not credited with the increase.
The February Producer Price Index (PPI) rose just 0.1%, but the core PPI rose 0.2%.
Last week's jobless claims fell 12,000 to 646,000 despite an upward revision to the previous data.
January housing starts jumped 22.2% to 583,000 from just 477,000 the month before. This was well above forecasts of 450,000.
-Gold
-The U.S. Dollar
Our current asset allocation is as follows;
95% Equities: (Normally 95%) Aggressive
80% Equities: (Normally 80%) Moderately Aggressive
60% Equities: (Normally 60%) Moderate
40% Equities: (Normally 40%) Moderately Conservative
20% Equities: (Normally 20%) Conservative
