Wednesday, January 30, 2008

Bookkeeping: Adding Short Exposure on this Rally

I just don't buy it. People need to ask what is so bad that the Fed just cut 125 basis points in 8 days. That should scare them. That is historic.

That said, I was buying short exposure off the surprise cuts in August and it cost me for about 8 weeks... until the market came to face reality.

Now what? 8 weeks of no stimulus... and calls for more cuts within a few weeks. The market got everything it asked for (and more) - now what?

So another prediction came true, this one from last fall - Fed funds rate at 3% by spring 2008. Back than that was an outlier prediction. Now, it appears "slow to the game" but I did not expect 125 bps in 8 days. So about 3 meetings got squeezed into 8 days.

Now it looks like we go to replay of 2001 and head to 2-2.5% in the coming quarters.

S&P500 is now at 1375. Lots of resistance overhead. 1380, 1400, 1420
I'll expect a sell off to start from one of those levels after euphoria leaves the market....
I've added incrementally to a few of the Ultrashorts. And will layer in if we breach the 3 levels mentioned above.

Gold jumping

Inflation is going to be a beast... even more than it already was. In about 18 months I can see a massive uptick in rates to try to tame inflation. And people blaming Ben for causing inflation, and "bowing" to the markets. The same commentators who today will be cheering. Guy can't win.

But for now... "they" rejoice. Since all that matters is today. Main Street will suffer in the long run. NYC wins again. At least for a few hours/days/weeks whatever. Until reality returns. Cramer is screaming Alleluliah. So at least he is happy. All his buddies in Manhattan can enjoy they have manipulated Ben into a twisted mess.

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