Thursday, April 30, 2009

Daily fiscal drain continues, but is market rally vulnerable?

The net, daily drain from tax collections continues (see chart below), but does that mean the stock market rally is vulnerable to a renewed decline?

The answer is, probably not. That's because two other things have occurred, or are occurring, at the same time.

First, bank credit appears to have stopped contracting. So whatever quantity of its own money the government siphons off as a result of tax collections, the private sector's money--credit--may be about to start flowing again.

Secondly, and perhaps most important, is the fact that households have a $455 billion cache of personal savings to draw from: near-record levels. This virtually ensures that the stock rally will continue, as long as confidence keeps improving.

Your strategy should continue to be to buy dips.


googleheim said...

This fact is warping.

The German finance minister who declared that the USA is practicing "crass" keynesian economics, probably wanted to see everything crash at the expense of others while allowing germany to go liquid and buy out and vulture pick ( ? ).

Anyway, now the USA folks are saving like Germans ( ????? ) if not better given the decrease in GDP and decrease in Tax revenue.

So who is Keynes and who is not ?

cuOnTheOtherSide said...

How much has the Government laid out since this crisis started?

How much has the "USA folks” saved during that time?

The US Government is practicing a version of "Keynesian Economics" and proud of it.