Farrell: G20 "Cornered"

In this corner with the red, white, and blue trunks is the United States wanting more stimulus.

In the other corner is most of the rest of the G 20 wanting more regulation.

The U.S feels that at 1.4% of their combined GDP the effort made by the G 20 pales in comparison with the 12% plus of GDP the U.S. is spending to jump start the economy. French President Sarkozy said "the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself."

The International Monetary Fund is calling on the world to spend 2% of GDP on stimulus efforts. One area of compromise would be for the U.S to increase its commitment to the IMF and encourage the additional aid to be focused on Eastern Europe. The members of the Eurozone are increasingly worried about the weakness in Eastern Europe and what that could mean for their economies.

The issue of protectionism wasn't much discussed as well. Probably, and dangerously, it wasn't brought up since most of the countries figure to protect their economies at the expense of whoever is in their way. It didn't seem there was much agreement this past weekend when the finance ministers met so don't expect too much when the full G 20 meets April 2nd.

The TALF - Term Asset Backed Securities Lending Facility - is supposed to start this week. The intent is to jump start the market for auto loans, student loans, and packages of credit card loans by providing financing for private sector institutions who will then buy the loans. There has been a lot of disagreement over terms and there is a real danger the program won't get off the ground. The government wants to be able to inspect the books of the firms that play but the biggest fear is the government will change the rules of the game after the fact and who wants that. Lately the ground has shifted so often that hedge funds (for example) are afraid they will agree to one set of conditions only to receive another set after they have signed on the dotted lines. Fannie Mae , Freddie Mac and Citi preferred stocks were thrown under the bus and that sort of treatment scares people. I'm hopeful smart people will figure this out since, in my view, this program offers solid hope for the credit markets. Get just one deal done this week and the markets will take heart.

There were some hints of good news last week. Inventories were down and that could well mean any slight pickup in final demand would require a step up in production. A thing called the Mannheim Used Vehicle Index was up hinting at an increase in demand for used cars. Copper was up in price as was scrap steel. The Baltic Dry Index - a measure of global shipping prices- increased. I was told that was because Letters of Credit (LOC's) are now more readily available for financing international trade, and that is a good thing if true. The CEO of LSI Corporation said late Friday the worst part of the semiconductor chip inventory correction is over.

The stock market took it all to heart and had an uncharacteristic four day rally. Since the beginning of the bear market we have had almost two dozen three day counter trend moves so it was good to see the fourth day get added. Volume was reasonably good. Healthcare, the largest weighting in the S&P, carried its share of the burden and financials were the stars of the week with 50% moves common. If I had my way technology will step to the front of the pack. A consolidation of the move off the bottom would not be unusual and, after that, volume, or an increase in volume, will determine if the rally can continue. If this is "only" a rally in a bear market it could jump up to 25% which would put the average back towards the temporary low set last October which would be normal enough resistance and is also about the 50 day moving average, another normal resting point.