Posted by
john on Wednesday, November 12, 2008 8:39:31 PM
Today the yield on the one-month treasury reached a low of 0.01%, before closing at 0.04%. What's next, send our money to the treasury and pay them to keep it away from us? If this doesn't reflect a vote of no confidence in the direction of economic policy (as the Dow closes at 8282, down 37-odd percent for the year), what would?
While on vacation during the summer of 2007, a delighted relative noted that the Dow was nearing an all-time high (which it actually achieved in October). I recall this moment because as I searched my brain for a clever take that would reflect similar optimism, I came up empty. Not that this would be so notable. However, what stuck with me was what my brain told me to say in response: New high? So what? I say sell. What's the catalyst for growth and higher prices? The housing bubble has run it's course, and now we just have to hope it doesn't implode completely. What's going to replace it as a catalyst? The Fed is too worried about inflation to drop rates, we know that. And since the election of 2006, we know there's absolutely zero hope that some brilliant moves in the fiscal arena will pick up the slack. So what's the catalyst to the upside? (Aside: unwisely, I did not put my money where my mouth wanted to be.)
It looks to me like this is the question investors are asking today. What's the catalyst? No one knows where that TARP money is going, or why. The Obamessiah's economic program looks like a blueprint for pre-Thatcher Britain. Rescuing GM is going to jump-start the economy? Raising taxes on risk taking? I'm feeling gloomy.