How Can the Markets Keep Going Up?

It can't except for the Bear Market Rally. The news about the economy and individual companies just gets worse every day. We know the story about GM and at this point, some rescue package needs to be offered by the government as the prepackaged bankruptcy cannot be orchestrated over night. There may be a fight in the Senate but a bridge loan is likely to be offered. The markets will probably like to see this saga end in the next few days so it can breathe a sigh of relief. The real work to restructure the company must begin immediately which should still propel a restructuring of the debt, labor contracts, and cost structure for the industry.

This morning the economic picture didn't get good news as the trade deficit was weaker than expected and initial jobless claims were higher than anticipated. The deflationary environment also continued with import prices dropping 6.7% from last month. Oil was probably a big factor in that decline.

As for corporate news Costco is seeing some weakness, Boeing is delaying the production of the 787 once again, Cummins Engine is lowering their expectations, and P&G said sales may be slower for the quarter. Most companies are seeing business slowing down and if the pace accelerates the recession will last longer.

The dollar is also very weak against the Euro and the Yen. This should bode well for Gold and other commodities. The Russian Ruble continues to be devalued. This is a story we will likely see across the world. The Yen looks to be the strongest currency and the Euro is seeing some new strength after dropping precipitously.

Fear is still high as the 3-month treasury is yielding zero and people just want to make sure their cash is safe even if they have no return. The is no place to hide as an investor and it is important to stay in stocks with no near term debt maturities and plenty of liquidity.