Bookkeeping: Closing Out the Week

As I've been doing every Friday, I am lightening up on all Ultrashort exposure going into the weekend, fearing whatever scheme the government/Fed/Kool Aid economic reports might have under wraps to implode the bear case Monday premarket. Keep in mind I've been saying S&P 1270 is the key level here - that is the cliff of the abyss - and it would not go down easy - we've used up $200 billion dollars this week (Tuesday) to defend that line in the sand. We closed Monday evening at 1275 so at 1290 right now to close the week, we've gained about 15 S&P points for $200 billion. So $13.3B for every S&P point - what a bargain! Much like Pentagon hammers for $241 and toilet bowls for $4200. Your money again hard at work... =)

Next week we can look forward to some more government schemes to save the system; some more hopes for (the new sexy one) 100 basis point cut on the 18th, and if the past is any indicator frozen trading on the 17th as no one does anything until the Gods on Mount Olympus bless us with their Fed cuts. Pretty much the same song and dance since August 2007 - we just keep doing it from lower and lower price levels as more and more people move from denial to acceptance. Unfortunately, the vast majority still live on Fantasy Island (tm). "Boss, look da Helicopter! da Helicopter!" [Note: Anyone born after 1975, did not get that last piece of sarcasm]

Anyhow I've built up a 20% cash position going into the weekend, with still some Ultrashort exposure. I'd be far more aggressive short if I knew the government would stay out of free markets, but that's not our situation in America so I have to deal with reality not my own fantasy of "America, the home of free market capitalism", so I have to be conservative.

Very simple game plan going forward - on either (a) a rally back to the S&P 1320-1330 level or (b) a break below S&P 1270 restart a much larger allocation of short exposure ... and then await the next government bailout/Fed bailout/"the credit crisis is almost over" blah blah blah moment where Kool Aid will punish the short exposure as it did to people Tuesday. Getting a bit predictable at this point. But this is the long grind down - I'd much prefer a dramatic swoosh which scares people, but we refuse to allow it to happen that way - so we will struggle down week by week instead until fair values are reached. We'll begin the same song and dance Monday morning... I feel like I have a fishing rod attached to Moby Dick, fighting these Kool Aid bulls.

Last, these darn fertilizer stocks just refuse to sell off 20-25% like I want them to!