What a day in the stock market. The last few months haven’t been easy, and just yesterday we were looking for the bottom, and waiting for a rally. I didn’t think we would see it so soon, but today we finally had a reason for one as stocks advanced in their biggest gain since 2002. What was the impetus? Investors loved the news about the Federal Reserve’s plan to make guaranteed funds available to banks and financial insitutions, in fact allowing many to exchange risky debt such as mortgages for US treasury bonds.
“Since the coordinated actions taken in December 2007, the G-10 central banks have continued to work together closely and to consult regularly on liquidity pressures in funding markets. Pressures in some of these markets have recently increased again…
“The Federal Reserve announced today an expansion of its securities lending program. Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS”
“In addition, the Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB).”
This is the plan the institutions and financial markets have been waiting for in my opinion. A bold, strong move by the U.S. Federal Reserve (with global collaboration) to shore up financial institutions, and the economy. In my opinion it says,
“We’re going to do whatever it takes to ensure the smooth flow of funds between institutions, and we’re not going to let the major banks or lending companies fail.”
Or the economy of course. On days like this I wish I had more cash to invest… but I’m also glad to be a long-term investor. If you’re in and out of the markets, how do you time something like this? Most people don’t.
That’s not to say it’s going to get any easier this year. The economy is still struggling and the credit markets have a long way to go to restore confidence among a lot of folks. But at least a few experts believe the U.S. will not see a recession this year.
“In its fourth quarterly report of 2007, the UCLA Anderson Forecast holds steadfast to the basic tenet of a forecast they have been making throughout the year, that the national economy is not technically in a recession, nor is there a national recession on the economic horizon.“
We’ll still have to wait and see on that one, but by June we should know the answer. With more uncertainty removed over time, the markets may really have a reason to rally this year.
Sphere: Related ContentNo comment - Post a comment
« Looking for the Market Bottom | GPS Navigation Anyone? It’s Finally Time »
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
