July 23, 2009
There are a number of "positive news" news stories today about the economy. The Bank of Canada governor Mark Carney is predicting that the recession in Canada will end this quarter with the resumption of slow but positive growth. Retail sales have come in at stronger than expected numbers and stock markets are reacting positively. In the U.S. today there is a significant rally that if it continues will draw more investors on the sidelines back into the markets. The Dow is once again above 9000 a level it hasn't seen since last January.
Remember, however that the Dow was at the 14,000 level two years ago ( it registered 14,164 on October 9, 2007)so it still has a long way to climb to repair the damage that was inflicted by its collapse at the end of 2007 and through 2008.In the U.S. the good news comes from banks like Goldman Sachs having paid back its TARP loans and having bought back the warrants which the U.S. government held for 1.1 billion dollars and hence at a handsome profit for the taxpayer.( See the excellent discussion of this in the New York Times Dealbook column today, The Deal Professor, Steven Davidoff, Chump Change from Goldman)
Goldman's stock which had fallen below 60 $ now stands at over 163 and perhaps is once again headed to the 200 level. Ford motor company whose stock was as low as below $3 is now over $7 and is reporting positive profits as car sales begin to recover. Other banks and industrial firms are reporting good results and their results are feeding the sunnier disposition of the markets.
July sunshine is nurturing animal spirits, Tarp money is being repaid with interest and dividends and most of the stimulus money is still to be spent. We shall know better in the next few months but for the moment except in the critical area of unemployment things are looking up in North America and Asia.
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