The big three have submitted their plans to get bail out money and it‘s almost a certainty that they will get it but only after an appropriate amount of handwringing by the politicians trying to show us that they are doing their due diligence. One wonders where that due diligence was when home loans were being given away with no oversight or when banks were borrowing obscene amounts of money that eventually meant they needed the government to bail them out. 

Regardless, we all know we are in a recession. The stock market has certainly priced in a prolonged and painful recession. To get out of this will require more stimulus by the government but the true and sustainable recovery for the economy will start with housing. There has been a rush of refinancing starting last week because of lower interest rates. That needs to continue and I think the Fed will lower rates below the 1% bench mark for the Fed Funds Rate. That will put more pressure on mortgage rates to fall. I think they are headed to 5%, maybe even lower. That will do more for our economy than all these bail outs.  

Watch housing- not to recover but just to stabilize. That will put a floor under the stock market. In fact the stock market will likely rally before it is clear that a floor is in place. 

Good Trading
Steve Peasley