For it's part, Citigroup jumped even more, ending the day at $1.45, for a $0.40, or 38.10% gain. Sending a memo to employees is not a novel approach to getting some stock buzz when anything more could have ended up being a lawsuit for potentially misleading investors somewhere down the road.
The stock market has been very hungry for good news, and those came in bunches like revisiting the uptick rule to hamper short-selling, Fed Chairman Bernanke's statement supporting major banks, and M&A news too.
The important thing to understand from Tuesday's bounce is how much pent up demand there is in the overall market place. The stock gains were the largest one-day rally of the new year. Unless good news becomes a trend, it will be short lived.
On the other hand, all of the market bears that have been looking at years of no growth and stagnant earnings may have been looking backward more than forward. Given that oil prices are down, interest rates are down, companies are leaner and meaner and still cutting, the savings rate is way up, debt and leverage have been and continue to be reset, the balance of trade has improved, and the government is pouring trillions of dollars into the economy, a short term bull rally at least is very possible.
It also should be noted that so many billions of dollars have been wagered to the short side over the last 18 months that 'the shorts' may end up taking it in theirs, and have to cover those bets in a hurry!
The amount of cash sitting on the sidelines is enormous. Most investors understand that inflation will be a factor somewhere down the line. After all, in the digital age, the U.S. Treasury can create currency instantly. I call this 'light-speed inflation'. Under these circumstances cash might be the worst place to keep your resources.
If it is possible for the Dow to lose 3000 points in a few months, there is no reason that it cannot do the same in reverse. The world we live in (and invest in) is much more volatile then ever before because news and capital move so very fast. Many prognosticators have pushed the potential for economic recovery to late 2009 or early 2010, at the earliest. The stock market, however, may advance six months prior to the recovery.
|Maybe spring 2010||86 (11.7%)|
Sheldon Liber is the CEO of a small private investment company and the princpal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.