Not So Fast

After analyzing yesterday’s rally, it was weaker than one would expect.  Among other things, the upside volume on the NYSE was only 59% of the total volume.  So, I was concerned going into today but thought maybe a couple more days of mediocre gains could be expected.  Well, that rally didn’t last long.  The S&P 500 lost almost 3.5% on heavy volume and almost 90% of the volume was downside volume.  Much different day than yesterday.  Weak gain and strong sell off.  That’s been the theme for the year.

The market cheered yesterday after the Treasury’s announcement of a takeover of Freddie Mac and Fannie Mae.  And, I do think it was the right move and it will help in the long run.  No question about it.  It was necessary and praised by Republicans & Democrats.  But, I mentioned in my previous blogs that this was a step in the right direction, but not the solution.  We still have an economy in a recession I believe, we have slowing global growth, investors still willing to sell at these low prices, and not enough fear just yet.  So, more losses expected.  But, I will say that we’re getting some real fear finally.  And, we all know, that’s what leads to bottoms.

Fannie Mae & Freddie Mac

After my post the other day regarding Fannie Mae & Freddie Mac, I got this comment from a blog reader of mine:

I heard that the two CEO had a combined income of some $31 million.  I think we should let them keep $1 million each and give the rest back, either that or put them in jail for GROSS negligence!

I don’t disagree with that solution but we have to remember that this organization was set up to buy mortgages and use leverage to do so to create liquidity and home ownership growth.  So, it’s not necessarily the CEO’s fault.  I’m not saying they didn’t mismanage the company.  I really don’t know.  But, this isn’t a typical company we’re talking about.

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