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The Rise and Fall, and Yes Rise Again of
Banking...
by Troy Patton, CPA - Finance Geek
 When
the Fed started lowering rates last fall, the intended
recipients of those rate cuts were meant to stimulate the Consumer Discretionary
and the Financial Sectors.
However, as you can
see from the chart at left,
investors kept plowing their money into the Energy and Material sectors.
This sounds familiar
does it not. Just like in the end of the tech boom, people were plowing money
into mutual funds that were internet or technology driven. This time, in the
month of July 2008, just as the prices were falling, folks were putting their
money into black gold, Texas tea. You get my drift.
Why is it that each
time, people are scared to invest as a contrarian and reduce that downside risk?
Throughout this Bear market, we have seen money markets climb to nearly a
trillion dollars. Most of that will find its way back to the Consumer and
Financial sectors once they have clawed their way back to reaching within 10% of
their new highs. The money markets are $300 billion greater than the last Bear
market of 2000-2002.
I have
been saying the market is setting the stage for a powerful comeback. As I type
this, the Government is setting the stage for the largest bailout in our
history.
Although
I am not for bailouts, this will heal the wounds much quicker than letting us
lick them for a while and then ultimately heal. Had they not bailed out the
mortgage backed securities, we would be sitting on dead real estate for the next
3 to 5 years. This way it should start to rebound within 12-18 months, in my
opinion.
Along
with this bailout, there are going to be some tougher regulations on some of
these idiots (not the Washington idiots) that got us in this mess and I suspect
we will see several indictments in the months to come as well. This bailout may
have alternative implications on the chart on the previous page as the
Government prints money and creates another tax on us.
However,
as I often thought in the past inflation would get out of control because of
Oil. I now think it will come back more in line due to weaker demand for items
and thus keeping interest rates low for a while, at least low enough for the
Government to get a break on the billions of dollars they will be borrowing to
bail out this mess.
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At the
end of the day, the government will make money, the dollar will rise, although
not as much, oil will stay in line, and the consumer will feel good about
spending and create a good run in the markets in 2009. The chart above shows we
have made the first move to let the Bull out of the Barnyard.
The opinions written within this publications are
the opinions of Troy Patton and are not intended as investment advice or an
offer or solicitation to buy or sell any securities. If you would like to
contact Troy Patton, he can be reached directly at 800-671-5872
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 Have
a finance question or a comment for me?
Send
it to
tony@financegeeks.com
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