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The TALF Begins, Brings Lift To Auto Suppliers

The reflation trade was very much in evidence today, as commodity stocks like steel, aluminum, copper and iron ore held their early gains, even if the broader market sold off not long after the open.

Elsewhere, it was a day for profit taking in banks, home builders, and real estate investment trusts (REITs)--three sectors that have had the biggest gains in the last two weeks.

Financials were particularly weak as the House of Representatives passed legislationpenalizing anyone who takes TARP money.

The TALF has begun! The government has announced $5 billion in aid to distressed auto suppliers, the first of all sorts of assistance to consumer companies. Auto suppliers like Lear, Borg Warner , and Tennecoall strong today.

This is a positive for U.S. AND Japanese auto makers. 80% of car buyers use sales financing, but the auto asset-backed securities market (where pools of auto loans are packaged and sold off) has ceased functioning normally. The feds are going to be providing low-cost loans to investors who buy those assets.

Will TALF extend to distressed assets? Apparently they will; mortgage-backed securities will now be eligible as well. This could be an additional help to the mortgage-backed securities market.

Where is the public/private partnership program? Geithner was supposed to talk about this plan this week, to help banks get rid of their toxic assets. Will the TALF expansion undercut this? Still not clear.

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