Finally!!!! Some good news- Is this the botttom??

The big stock market rise yesterday, March 10th, of around 7% was welcome news. Citigroup actually made a profit for two months but with Billions of dollars for the taxpayer I would hope so. The even better news is that the Fed wants the SEC to put back the “Uptick Rule.” Before the markets collapsed last August and September, short selling was not too big an issue. When the markets fell, it was a huge problem. It had been the rule for decades that if you are betting on a stock falling, to sell it short it must first go up. This prevents short sellers from driving it down more. The Bush Administration removed this rule in 2007 and really made the market drop worse.

The other big problem is the accounting rule of “mark-to-market.” The Fed stated they want to review a compromise here. This rule just came into being before the crash also and is making companies look even worse, especially financial stocks. It requires companies to list assets at the current market value. That seems to make sense but it is more complicated than it seems. If you are a bank and have a note a high quality company is paying on with no problems, you should show no loss, right? Wrong! If the bank tried to sell the note right now, they may lose 20% due to the market fears. So, even though they are not selling it and it is performing well, the market value of the asset is 20% less until the company pays the note and then there is no loss. In the meantime, it makes the bank appear to be losing money when they state the total losses they have even though there is no loss until they sell it.

Is this the infamous “bottom of the market” everyone is looking for? Most likely not quite. Regardless if it is, you should NEVER have more than 80% of your money in the market and rarely even that much. We need to see how much more bad news there is and April reporting of the first quarter results will really determine the direction of the markets. If it is better than most people hope, then the markets could start moving up. Stay tuned….