Another Sucker Rally? Hmm…
I was admiring my CAPS performance. During the months of March and April, it went from 0 points and 40 percentile way up to 1000 points and 98%. Just about to pat myself on the back for getting such amazing performance, when I got very suspicious. What on earth happened during those 2 months that would justify such amazing performance??? Answer: nothing I can think of.
Big problem. That means this is just another bear rally. OK, maybe the market was just oversold and there was big-time hedge-fund de-leveraging. Still, I would not be surprised to see unemployment top out at the same level as the early 80’s, that is hovering around 12%. Add to that an interesting article that the high oil prices summer of 2008 of $150 a barrel and gas at $4 per gallon caused the current recession, and that we have yet to feel the economic pain of credit market freezing. Good ol’ Uncle Sam is “helping” people struggling with their mortgages, meaning that those who are going to default anyway are still weighing down MBS values, so the full brunt of mortgage defaults have yet to be felt in CDO’s and MBS’.
I am not convinced by the current bear market rally. I was examining the charts from the Depression in the 1930’s, and they also had rather impressive rallies, only to fall back to earth.