Now What Ben?

Ok the black box financials are out of the way - what did we learn from them? Nothing other than they can pull levers to make their earnings pop out "not so bad" (vs lower guidance of course). Ben's chopper dropped 50 basis. Now what? It's been 48 hours since Ben cut, and singed the bears.

Now what? When do the calls start for 50 basis points at next meeting? Or wait; things are so bad we need an intrameeting cut. Do we wait until next Monday for that? Or tomorrow? What can be done to make these homes affordable and not make a few million people default in the next 18 months? And suddenly give all these people in the mortgage and construction business their jobs back. (ok we at least saved people's jobs in the financial sector)

I wrote yesterday:

As an aside, I am anecdotally reading unbridled enthusiasm of bulls everywhere from message boards to investment sites. Hence, this leads me to stick to my theory that once the market has sucked these players in to believing nirvana has arrived, another swift boot to the rear should ensue.

Yes some more deals will now get done - yes people's credit cards will now fall from 14.88% rate to 14.38% rate (maybe, these card companies don't pass everything along) and some people on the fringe with variable mortgages might be able to refinance if they are not upside down. But it doesn't eliminate all the other issues and does it really make banks trust what each other hold? Nope. The only healer for those issues are time and price. So while making the portfolio more long, I still remain cautious intellectually - and this unbridled and unrestrained call to arms by the bull camp makes the contrarian in me take notice. I still have this feeling in a few weeks, we are going to look over and who is laying next to us in bed, and wonder 'what did we just do'. ;) The strong sectors should continue strong, but those sectors that ramped the highest here in the past half day might just get a reality check, as most of their rocket fuel will be short selling and not a flood of new buyers.

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I don't know, I am seeing a lot of financial stocks falling back below 50 day moving average already (Morgan, Merrill, Bear, Lehman - I expected better guys!) - and the retail stocks showing some weakness ... again. Mother Goldman is still ok, but do we take it to 52 week highs in this environment? This 'rally' looks more and more like shorts covering. 1 day does not make a trend but this lack of follow through is a bit stinky. And oh yeh, SP 500 is 1% off all time highs.... make sense? Not so much. I will still have to lean (with nose closed) a bit bullish because the indexes technically look ok, but that can change in a moment's notice. And outright bulls need people like me... since I make up the wall of worry. And I am their contrarian signal - funny how it's all so circular, no?

But hey at least we brought unfettered speculation back to the US market (see previous post!) That's always a great thing! Right? Ben? Hello....?

Again I remain cautiously positioned and while I underperformed the last 2 days, I think some of these short ETFs and a high cash position will still serve pretty well for the next 6 weeks; it is serving very well today for example so I am making back some of that Tuesday underperformance. The next 7-10 days should be very telling - a retest of the indexes averages will be in order, and how they behave their will tell us if there is pent up demand for equities or we just hit fool's gold (I believe fool's gold is also at a 27 year high or maybe an all time high considering our politicians actions).

Yes those hocus pocus investment banks can hide stuff, but what about the smaller regional financial institutions who do normal stuff like... banking - what will they be saying when they confess? Answer: the truth. It's not pretty, unless your a millionaire. Confession time is October. See you then.

Long truth and reality