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Daily Archives: April 27, 2009

Bear Market Rally: then and now

I am not indicating at all we are going to have another Great Depression, mainly because today’s policy makers learned the past mistakes, especially Fed’s monetary/credit policy is much more expansionary (also innovative) than in Great Depression. Bernanke’s famous comments were “we won’t do it again”. But one and half years into recession, banking sector is still in a huge mess. I am very worried.

The graphs below compare bear market rallies, then (1929-1933) and now (2007- ).

Great Deleveraging:



Great Depression:

great depression rallies

(click to enlarge)

Charlie Rose with Joe Stiglitz and Bill Ackman

Stiglitz is 2001 Nobel prize winner of Economics; Ackman is the hedge fund manager who rocked the wall street with his book on shortselling.

GM outlines restructuring plan

Government’s bankruptcy threat seems quite effective. GM ditched Pontiac brand, keeping Chevy, Cadillac, Buick and GMC. GM will also close 42% of its dealership stores. The plan also includes a debt-to-equity exchange program and bond holders will not be happy about the huge haircut. GM may eventually go to bankruptcy court.