It won’t be long before the second half of the original Troubled Asset Relief Program (TARP) funds are authorized to be distributed to banks to help prop up the economy. This $350 billion, or even more, is following the first $350 billion that banks received. While the government’s public intent was for the banks to use this money to help the banks begin lending to each other and to businesses once again, that result never emerged. The funds were instead used to increase assets on balance sheets, acquire smaller institutions, and as Jeff Rose reported, pay bonuses to keep top talent.
None of this seems to have positively affected the economy. It is possible that we might be worse off than we are now had the original TARP funds never been distributed, but since there has been no marked improvement, market sentiment is still pessimistic. This week is projected to present another depressing turn for stocks as more companies declare their earnings and the government will release reports on consumer confidence, housing, and leading economic indicators.
If stocks dip low enough, I may finally have a chance to buy into the stock market at a lower price than I had earlier. If VTSMX, an index of the entire stock market, falls below 18, I will purchase $500 in shares. Buying on the dips has been my experiment with market timing, and it has not worked out well so far. My purchases so far have been at $28.42, $25.56, $21.85, and $18.00, while Friday’s ending price was $20.12. I have faith that this will pay off in the longer term compared to trying to time a specific bottom, but it’s been a losing bet in the short term.