The Sky Is Falling…What Again?
INVESTORS ARE LINED UP TO BUY---TREASURIES?
About a month ago, the 10 year Treasury paper yield was in the range of 3.1% to 3.2%. Today, they closed at about 2.34%. This can only happen if there are many more people who want to buy Treasuries than there are people who want to sell them, not exactly the actions of people who are worried about the quality of Treasury paper. In summary: there are record numbers of people who want to buy Notes and Bills and Bonds issued by the Treasury. I remember one Fool article predicting a 0.75% rise in Treasury rates: never happened.
WHAT ABOUT THE DOWNGRADE IN TREASURIES?
Yeah, what about it? Only S&P did the downgrade: from AAA to AA (not Fitch, not Moodys). I agree with those who think that S&P got it wrong. If you read the specific reasons for the downgrade, I like the comments of George Will: this was a case of political punditry, and not serious financial analysis based on an Excel spreadsheet, not to mention that trivial $2 trillion boo-boo in the original press release.
BANK OF AMERICA
Apparently, much of the DIA collapse came from the collapse of BAC, which was hit by a $10B lawsuit form AIG. If this is the only reason, then time to check your watchlist and go bargain hunting. LIBOR is still down at reasonable levels, and the ECB has decided to prop up Italian sovereign bonds.
DOUBLE DIP RECESSION
I do not think so, but only because I do not think that the economy recovered far enough to qualify for a double dip. From my perspective, the economy simply got less bad. I have read Fool articles about the increase in profits in the S&P 500 index and surely this is a sign of economic growth, but there is a different story if you simply look at GDP: it has simply gone sideways, not enough % increase to qualify for even a modest recovery, and I see no reason for anything to change anytime soon.
WHERE DO WE GO FROM HERE?
C’mon folks: surely you know that anyone who thinks he knows the answer, run, don’t walk, in the opposite direction. Tomorrow, DIA could up or down by 500 points just as easily. We simply do not know. So there.