In conclusion, as the must-have GaveKal organization writes:

“Something very important happened last week, which almost nobody seemed to notice… The members of FASB decided to swallow their pride, [and] quietly announced a reform: An almost complete suspension of the mark-to-market accounting for assets in ‘distressed’ markets. For good measure, the FASB also radically widened the definition of ‘temporary’ impairment of troubled assets, thereby allowing banks to ‘write up’ the value of some troubled assets if these have been hit by falling markets without (yet) suffering any significant credit loss.

"These 2 reforms were specifically designed to encourage banks to ‘use more judgment’ in valuing distressed assets on the basis of long-term cash-flows, rather than volatile market prices.”

I continue to invest and trade accordingly.

The call for this week: Last week, the DJIA and DJTA broke out above their respective 50-day moving averages (DMAs). They also now reside above their 10-DMAs and 30-DMAs. The 34% rally by the Transports since their March 9, 2009 low is particularly interesting, given their economic sensitivity.

And don’t look now, but lumber has quietly gained nearly 30% since its February 2009 low. Again, that’s pretty impressive given the current housing backdrop.

Meanwhile, I'm watching Personal Consumption Expenditures (PCE), because that's how recessions end. Indeed, if the “real” PCE has stabilized, the end of the recession isn't far off.
Manifestly, the stock market always turns up before the economy bottoms. So if the January/February strength in the PCE is for real, it's an extremely positive event. However, if the PCE strength is just a reaction to the +5.8% COLA adjustment, as well as the 13.2% increase in IRS tax refunds year/year, then the upcoming month’s data will revert to a more subdued reading.

Accordingly, I'm closely watching the PCE - though my investments in platinum (see PGM, PTD and PTM) broke out to new reaction highs last week, and indices playing to Brazil are attempting to break out to the upside.

Still, it's day 16 in the buying stampede, and I've turned cautious. And isn’t it interesting how the markets follow the news: Following Friday’s fall (-148 DJIA), the Obama Administration warned that some banks will need more government aid and that bankruptcy might be the best option for GM (GM) and Chrysler.



In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.