What truly baffles me is GM is trading at $1.6 when the bondholders are getting 10-20 cents on the dollar? if GM and Chrysler goes, so will a lot of other small companies that depend on them as customers.
How about Citi and BAC? 4x from the March lows. Massive loan losses still to come, govt preferreds still need to be paid off...
Job losses have slowed to a loss rate of 500K per month (wait a second, we are still losing 1/2 million jobs a month) with no end in sight.
Watch out, oil prices are creeping back up and so are commodity prices. Low prices kept inflation down due to the slow down, however, if inflation comes back, Feds have no choice but to start raising rates.
What do we do from here? I am 100% invested in equity in my long term portfolio (pension, RESP, some RRSP). Large % cash in my trading account. If this rally continues (almost telling us that the recovery will happen in the 2nd half of the year now versus 2010 as previously predicted), I am going to go contra-herd and sell everything and hold cash. Herd mentality now is we cannot miss this new bull market so everyone is now charging back to buying.
Will this optimism actually start fueling a new spending and investing boom? Again it's all paper, no real jobs are being created, no real wealth is being created. The crash is starting to slow down (repeat, slow down, not recover yet).
But then again, I could be wrong. after 9/11, the market doubled in 3 years...... until we find some ways to create jobs for Americans again, the guys that will boom will be China and India and commodities......
At this time, I really do not know what is going to happen next.
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