Tuesday, March 10, 2009

Can It Be...A Rally?

The markets are up 4-5% across the board. With Energy and Banks flying today.

The S&P 500 is at 705 above the 700 level.

The markets are rallying today on the backs of Citigroup's internal memo to its employees that the first 2 months of the year have been the best they have had since late 2007.

A few points:

*Don't believe anything that comes out of Vikram Pandit's mouth. All this guy has done since he has taken over at Citi is to bullshit the public.

*What does the statement "the last two months were the most profitable" actually mean? Does that mean they only lost $2Billion in this time frame? "They made money on an operating basis" This is not only a false but fraudulent statement , as it doesn't take into account losses from the crap they have on their books.

* The stock is up today, because sooner or later Citi would have a short cover rally. A dead cat bounce. There has been tremendous arbitrage pressure on Citi (Buy Preferred Stock - Short Common Stock) since the govt announced the preferred conversion. This was a matter of time, the stock may rally to the $2 range (currently $1.33), but the stock has little or no value after marks, write downs, and adjustments are made. In short the government is bailing out an insolvent institution, just making sure the shareholders don't get roasted. They are just buying time till the ax falls down.

*I understand Pandit has to rile up the troops, but how about for once give us a quarter without $10 Billion in write offs or losses? How about you pay the tax payer back the TARP money you guys swallowed? This would be nice

Tim Geithner is talking smack once again. There are rumors of his immediate dismissal from his post as Treasury Secretary...this is a huge positive for the market, as Geithner is ill equipped to deal with the problems the banking system has. This would be a huge blow to Obama, but hiring Paul Volcker would cut him some slack.

The S&P 500 has some room to run up here. Maybe to the 750-775 area, which is about 600-800 Dow Points from the 6800 level currently.

The positive catalysts could be the following:

1-Reinstatement of the Uptick Rule - 50/50 chance of happening.
2-Geithner getting the Ax - 30/70 chance of happening.
3-Positive earnings reports from Goldman/Moose next week. Don't count on it.
4- Eliminating Short Sales in the financials - No way this is happening.
5-Too much negativity
6- Hearing temporary suspension of 2x and 3x Sector/Index ETF's that are causing major volatility disruptions...This wont happen...but it should...I am preparing a post on Structured Investments/ETFS, will be out soon.
7- Crude Oil Futures trade above $50 will trigger buy stops and ignite short covering across the sector...This is the most likely scenario.

Been getting a lot of good feedback on the LTCM post from yesterday.
Thanks!

3 comments:

  1. Getting rid of the Uptick Rule will add 500 points to the Dow. This was absurd when it was taken away. Its been a Short Seller Paradise since. Chris Cox..what an absolute incompetent human being! Can we check if he really went to Harvard Law & Business? I think he did a Rosie Ruiez at the Boston Marathon.

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  2. Do you really think that Paul Volcker will be a step up? I mean this guy is the biggest Hawk on the street, not to mention he had interest rates in the upper teams when he was at the helm of the FED.

    I just cannot see a guy who has been called "the worst FED Chairmen" being suited for the position. I mean in 15 years would anyone trust bush to lead...anything? From what I understand Volcker, although a step up from the incompetent Geithner, would still not be too much of an improvement.

    ReplyDelete
  3. Do you really think that Paul Volcker will be a step up? I mean this guy is the biggest Hawk on the street, not to mention he had interest rates in the upper teams when he was at the helm of the FED.

    I just cannot see a guy who has been called "the worst FED Chairmen" being suited for the position. I mean in 15 years would anyone trust bush to lead...anything? From what I understand Volcker, although a step up from the incompetent Geithner, would still not be too much of an improvement.

    ReplyDelete