An analyst prognosticates on a better 2009, much different from general forecasts and what’s transpiring.
It seems Jeremy Siegel would have to eat his words again. In his uploaded article early last month, the Wharton professor confidently asserts, “The financial stocks will still be burdened by bad loans and government obligations. Nevertheless, new lending will prove extremely profitable to the banks whose cost of funds is now essentially zero. The Fed might find that it will be forced to raise rates during the summer, earlier than planned. And I believe long-term Treasuries are in a giant bubble and their prices will fall to earth once the economy improves.” In fairness, we have to give due credit to the man for being so bold, at the most.
But current market conditions are clearly refuting most of Siegel’s words. First, banks haven’t shown any evidence on increased responsible lending to qualified homeowners (take note, “responsible”). We’ve even come across Citibank’s plan of upgrading its company jet that would amount to $50 million and Bank of America’s lavish Super Bowl sponsorship last week. No clear, detailed bail out fund usage plus excessive incentives for top performers (disguised recklessly as business schemes) naturally equals a bail out disaster. Second, private investors are not yet ready to absorb the government’s offers of “previously” toxic mortgages unless the government guarantees their investments in return. It’s still an issue whether Obama’s bailout will really work. Lastly, government-backed securities will take an even longer time to lose its current demand. Investors are still too adamant about risking their money in the private sector, a situation that’s taken advantage by the alternative safer instruments. Therefore, there’s nothing upbeat to look forward to this early.
Should the public trust the notion that today’s the right time to invest when prices are still low and they could sell high during the second quarter – a period “earlier than most economists now anticipate” according to Siegel?
Spontaneity without assurance is risky and as we all know, very uncertain.