The rally yesterday has now taken the S&P’s 23.5% higher from the bear market low of 666 (which happened to be just 1 point above the 61.8% retracement of the entire bull market that began in Aug ’82). The 50% retracement in the S&P’s is 839 and is a definite point of reference here. Upon further review of the PPIP, the question of properly pricing the assets will remain the main sticking point as even Bernanke’s B52 in many circumstances will be able to fly between the bids and the offers. Jamie Dimon for example won’t be giving stuff away. This program is also another huge gov’t intrusion into the financial markets on top of everything else and as we further socialize finance, we further misallocate capital as we distort the risk and reward. It’s also only dealing with the symptoms of the current problem. But, I hope I’m wrong and I hope this works. The 5 yr CDS in the major banking institutions yesterday fell between 10 and 20 bps.
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