InvestorDeb (71.71)

Bear Hunting Seaon Opens

July 14, 2008 – Comments (1) | RELATED TICKERS: FNMA , FMCC , FWLT

Over the weekend, the Federal Government went a-hunting bears... at least the ones who tried to drive FRE and FNM into oblivion on Friday. I think this may be the official opening day of hunting season...

Bears that fan fears of insolvency especially in the GSEs and Investment Banks have created real panic in the capital markets, panic which may cause the target of their rumors to become self-fullfilling prophecies and die. These bears are coming under more focus to be discovered and shot. Now, I love bears... they taste like chicken... Not only that, the bears are the ones that drive RIMM below $110, the XLF to $18.29 and FWLT to $62 -- great entry points or add to levels of capital. Without the bears, the bulls don't make as much money (and vice-versa).

I wrote in April that the record short interest and removal of the uptick rule last summer, will prove to be a huge catalyst for higher stock prices coming out of this credit mess. I think it could be the most powerful rally we may ever see for this reason...

The record number of people who are short the market means that there are a record number of folks who will HAVE to buy stock in the future. Short-covering ralleys are typically swift and sharp, as bears scramble to buy, since their risk of loss is unlimited... Clearly, we are DUE some buying, if only to flush some of the weaker shorts out of their positions. I still believe that this, coupled with a strong case for global growth will drive stock prices much higer, possibly much quicker than anyone realizes.

Time will tell...

Foolish Financial Freedom for ALL,

Deb