Credit Crisis Only Thing Hindering Rally

Earnings season hasn't been all the bad. Earnings have declined, but most companies have met or exceeded expectations. The real story has been with growth. A lot of companies are becoming clearer with outlooks for 2009 and 2010. 2010 looks to be the year companies make their way back to black. I want to talk a little bit about BAC earnings and how the credit crisis is the only thing keeping the market from soaring.

BAC beat earnings but dropped 25% on the day earlier this week. Why? They reported a higher jump in default loans. This means that people still cannot seem to pay back loans. Until we get this fixed, the economy will be shaky and the market flat. The government is trying to establish a Credit Cardholder's Bill of Rights calling for more transparency to cut down on sudden changes in interest rates and time periods.

The government also said it is converting its preferred shares in bailout companies into common shares. Why is this so bad? This gives the government ownership stakes. Now the government will technically be able to vote on certain things and have more rights. This hints to some as nationalization.

Until this confusion gets settled in the financial industry and the government gets the credit freeze thawed out, I see no huge rally in the market. We had a good run (over 20%)and now we will hover around 8000 in the Dow until we see significant improvements. Hold tight as the rest of the earnings season plays out. If the Dow drops back down under 7500, we see a huge buying opportunity. But for now, keep patient and realize that cash money doesn't always come quickly. When it comes, it will not stop.