Once again, the Dow Industrials has confirmed that there is support around the 8,000 level. Yesterday’s bounce marked the 12th time the Dow has bounced as it approached 8,000 since October. Only once has it failed to do so. That was November 20, when it set the low for this bear market at 7,464.
Yesterday’s bounce was certainly a welcome sight. The bad news sure seemed like it was building to a crescendo. Now maybe we’ll get that Inauguration rally. But ultimately, I have to wonder if the November 20 low will hold.
*****I said in yesterday’s Daily Profit that I’d be tempted to buy Graham Corp (AMEX:GHM) again if it dropped below $9. Well, Graham hit $9 exactly and then staged an impressive 11% bounce. But with oil prices sitting on $35, I expect we’ll get another shot at Graham below $9.
*****Early this morning, Bank of America (NYSE:BAC) received $20 billion from the TARP bailout fund. That puts its total received at $45 billion, the same as Citigroup (NYSE:C).
Many in the financial media are upset about this last $20 billion installment for two reasons. First, Bank of America says it needs the money to complete its acquisition of Merrill Lynch. Apparently, Merrill is in worse shape than Bank of America thought when it agreed to the takeover.
Second, it’s come to light that Treasury Secretary Paulson agreed to give Bank of America more money back in mid-December. The problem? Paulson didn’t tell anyone about the agreement. And last I heard, the money Paulson’s doling out isn’t his. It’s ours, it’s taxpayer’s money. There absolutely must be disclosure about where our money is going.
It seems, however, that Americans in general, are taking this news in stride. That’s not necessarily a good thing. Remember how much anger there was at the original $700 billion bailout plan? Well, we’ve exceeded the original number by a long shot, if you include the Fed’s actions. Throw in Obama’s $825 billion stimulus plan and pretty soon, we’re talking about real money.
Americans seem almost numb to the bailouts now. You get taken advantage of enough times and you start to expect it. Of course Bank of America needs more money. Go ahead, just take what you need.
A responsible public servant would understand that he or she is the representative of the people. Unfortunately, Paulson just looks like a Wall Street insider with access to public funds.
*****So where do the bailouts end? As we’ve seen, once you start handing out money, everyone gets in line. First it was banks. Then it was the automakers. Obama’s stimulus package is essentially a bailout for taxpayers and the unemployed. And some states have even suggested they should receive Federal bailout money.
Bernanke seems comfortable throwing out as much money as he feels is needed. But at some point, the bailouts have to stop.
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