The End of “Cash for Clunkers”
Aug 25, 2009
Posted by Jody Eisenman | Filed under Uncategorized
The “cash for clunkers” program ended yesterday in another example of rewarding failure. Vehicle sales were boosted to the tune from an annual rate of 9.7 million in June to 11.2 million in July. This number had been above 16 million for most of the decade prior to the recession. Many dealers had already dropped out of the program due to government delays in actually getting paid. Unfortunately, I fear this is exactly what will happen with Obama’s new health care bill. Apparently, many Americans have the same fears, judging by the reception at many town meetings. When was the last time the government ran anything more efficiently than private enterprise? However, based on the sales boost, the administration is now looking at a similar type of “cash for appliances” this fall.
Obama is reappointing Bernanke as head of the Federal Reserve. I believe that the markets will take this news as a positive. Although it is not completely clear how far out the recession we are, the stock and bond markets have been positively euphoric for the past several months. Since the March 9 lows, the DJIA has rallied over three thousand points to close yesterday above the 9500 mark. Although there are now many “experts” who believe that the market is now overvalued, one must note one salient fact. That is, as we saw this past year, the market will frequently go way past any “normal” level both on the upside and the downside. Therefore, although a correction could come at any time, I think that trying to pick a top (or bottom) is almost impossible. Obviously, anyone who has been short for the last few months has gotten decimated. As always, play the trends, and use stop losses.
