Market Talk

Is anybody else sick of all the Dow 10000 stories circulating through the media over the last 24 hours? CNBC can’t get enough of it. The milestone also earned a spot on the front page of WSJ as well as the lead story in the Money & Investing section. Even our Market Talk blog has covered it here, here, here and here.

Dow 10000 is everywhere, as if it’s some sort of monumental milestone — that the index first hit a decade ago.

Whoopty-do. Someone who invested in the Dow 10 and a half years ago will now have broken even. Break out the champagne!

Listen, we’re just as guilty as everyone else with all of our coverage of the Dow crossing the “psychologically-significant” level. But in case you haven’t noticed, there’s a common theme running through all of our stories. This is not 1999 all over again – the reaction to Dow 10000, believe it or not, has been much more muted than it was a decade ago, and for good reason.

Everyone was making money and living the good life in 1999. Now, stocks are bouncing off multi-year lows after the worst financial crisis since the Great Depression.

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Can we trust this guy?

The markets are cheering Fed chairman Ben Bernanke’s prediction that the recession’s “likely over,” but Big Picture blogger Barry Ritholtz brings up an interesting point. Considering Bernanke’s track record as a forecaster, why does anyone trust his latest economic forecast?

Bernanke originally described the subprime crisis as “contained,” didn’t believe the housing crisis would affect the broader economy and “thought the Bear Stearns situation was a one-off,” Ritholtz notes.

Still, investors should pay attention to what he says based on how it can be related to his interest-rate policies.

“The Fed has made it clear rates are staying low for the foreseeable future, so this becomes a non-issue in this context,” he says. “But his economic forecasts? Don’t bother.”

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Did you really say "TARP profit? Are you sure about that?

We’ve been critical of the supposed TARP profits everyone’s been talking about over the last few weeks. And now there’s more evidence to back up our skepticism.

Treasury Department likely won’t recover all of taxpayers’ investments in GM and Chrysler, according to the Congressional Oversight Panel. The Treasury has given nearly $80 billion in aid to the entire auto sector. Some loans have already been repaid, but it’s doubtful all loans to GM and Chrysler will be paid back in full.

Look, the Treasury may have made money off the eight biggest banks that repaid their TARP obligations. But it’s irresponsible to call the government’s bailout plans profitable at this point in the game without considering all the parties involved. Losses from from AIG, Fannie Mae (FNM), Freddie Mac (FRE) and the auto makers, not to mention other costs such as stimulus plans and lost tax revenue, were largely ignored when pundits were talking about TARP profitability.

So why have several financial firms been able to repay TARP, but the auto makers can’t? Part of the reason is GM and Chrysler were losing market share before the crisis ensued, whereas financial firms were doing well, Time’s Curious Capitalist blogger Justin Fox says. 

“The banks simply aren’t in the same competitive bind GM and Chrysler are,” he says.

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Better take advantage of that window of opportunity.

Banks are recovering, the economy appears to be on the mend and stocks are up nearly 50% since March. Everything’s back to normal and life is good again, right?

Artificially it seems that way. But it can’t be forgotten that arguably the worst financial crisis since the Great Depression occurred only one year ago and not much has really been done to prevent a similar meltdown from happening again in the future.

Financial regulators have been focused on fixing big banks and returning them to profitability, which is great, except the problem is truly reforming the financial system requires banks to become smaller and less profitable, Time’s Curious Capitalist blogger Justin Fox says. There used to be lots of chatter of overhauling regulatory reform. “Lately, not so much,” he notes.

Nevertheless, something needs to be done soon before the window of opportunity closes.

“The time to start cracking down is coming soon,” Fox says. “Because if big financial regulatory reform doesn’t happen in the next year or so, it may never happen.

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Surprised? Ah, yeah. Did I hear you say "TARP profit"?

Finance bloggers will never be confused for shy, quiet people. They’re more than willing to do a full-out takedown of something that sparks their ire.

A few bloggers were rather incensed today after The New York Times and Financial Times each published stories detailing how the government is supposedly profiting off of the hundreds of billions of dollars spent on bank bailouts.

Even if the Treasury is making money off the eight biggest banks that have repaid their TARP obligations, losses from AIG, Fannie Mae (FNM), Freddie Mac (FRE), GM and Chrysler can’t be ignored, bloggers say.

And other costs associated with TARP, such as lost tax revenues and stimulus plans, must be accounted for before discussing TARP profitability.

Nevertheless, NYT presents the case that taxpayers will benefit from the bailouts because Treasury is making money off the TARP, with Goldman Sachs (GS) and Morgan Stanley (MS) providing highest return on investment.

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Buy it now!

GM’s deal to start selling cars on eBay is part of the auto maker’s renewed focus on customers and products, although skeptics wonder why it took GM so long to develop a presence on the online auction site.

Deal allows consumers to place online bids for new vehicles from most of California’s GM dealers. Trial will run through Sept. 8 at gm.ebay.com, but WSJ reports GM may ultimately expand the pilot program across the US. The site also allows consumers to compare pricing models as well as get more information about trade-in values and the cash-for-clunkers program.  

“It allows a convenient alternative if you’re in the market for a new car but either can’t get to a showroom or want to shop from home,” Mark LaNeve, VP of vehicle sales and marketing, writes on GM’s FastLane blog. He argues the plan also helps dealers because it allows them to put showrooms and available inventory on the Internet.

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Are investors reconsidering their bets on an economic rebound or just profit taking?

US stocks have been depressed all day, with the Dow falling as much as 150 in earlier trading. Banks leading the way down; when even an SNL sketch can hit the market, you know the target’s pretty fat.

Bank of America (BAC), JPMorgan (JPM), Morgan Stanley (MS), US Bancorp (USB) all off roughly 6%.  Contributing to the declines may be the increased amount of negative details emerging from the stress test results, which is creating confusion and uncertainty.

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The line's shorter than it was, but it's still long.

ADP reported this morning that “only” 491,000 private sector jobs were lost in April, which is well below expectations and would be the smallest job loss since October.

ADP’s had mixed results in the past with this survey, but if 491,000 job losses is close to accurate, it could mark a turning point for the economy, Justin Fox writes at Time’s Curious Capitalist blog.

“A marked slowing in the pace of job destruction would be the clearest sign yet that the economy has in fact turned and may even start growing later this year,” he says.

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Lots of chatter about whether this fierce seven-week rally is the beginning of a new bull market.

While it’s probably too early to tell, FusionIQ CEO Barry Ritholtz says investors should ponder whether this recent run-up mirrors 1982 or 1974.  

Ritholtz notes the 16-year secular bear market came to an end in 1982, when the Dow settled above 1,000 on a permanent basis. While this could be 1982 all over again, he says the 1973-76 period may be a better precursor.

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Look what we found at the bottom of the ravine.

US stocks shoot higher as investors keep searching for “green shoots” in the economy while largely ignoring the dismal 1Q GDP report.

The 6.1% GDP decrease in 1Q, coupled with the 6.3% contraction last quarter means the economy suffered through its worst six-month slump since the Eisenhower administration. A little disconcerting? You bet.

But GDP is a lagging indicator and the market seems to have already digested the horrible news through various reports in recent weeks and months, James Picerno writes at The Capital Spectator.

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