Cash is NO king now, especially USD
The game is now buyiong quality stocks on the dip, especially after monday sell-offs.
- Liqudation phase (where everthing dropped including gold) has already long-gone passed. Capitulation done or not? Most part of it, I think.
- US Fed fund rate @ 0.25% and Fed is crazily printing money
- US Fed and Treasury basically won't allow big banks to fail. They will keep the zombie banks moving by pumping lots of taxpayer $$$ into them
- Countries like China will stockpile gold, basic materials, durable goods instead of buying more US T-bonds
- Treasury, Fed and banks are teaming up to keep insolvent firms alive for a while. TARP, TALF, PPIP, Mark-to-Fantasy, Fed buying T-bonds, ... all tools are used and new tools to be created. They are pumping up low-rating corporate bonds by extending more credits to them. Yes, eventually this will come back and haunt the US economy again, but it seems like money printing madness will go on for a while.
- The potential consuming power of counties like China, India and Brazil can cover the shrinking demands by US and EU. Inflations can start over again from foreign countries. (note: Housing in metropolitan area of China is sizziling again)
- Stress test is actually a relief test
- Cooked data to inspire market hope
- Many rules aimed to target short selling
I'm not buying financials but I had covered some my REITs shorts. I only will do some put options on REITs and financials like regional banks and credit card companies from now on. I'm overweight on commodity sotcks like DOW, AA, AKS, MOS with some long term out-of-money puts and calls for protection/leverage. I'm also looking into buying X's $25 or $22.5 call option tomorrow.
I also don't believe in homebuilders like RYL (close @ 23.9 today, give me a break...), either.
We had lots of overleveraged suckers (LVS, MGM, for example) rallied from their bottoms ( and I lost 1300 CAPS points on just 10 of them up-to-date) and who know how long the trend will last. I think DOW @ 9K is very likely in a month or two before the next leg down. Unless the swine flu are proven to be really a serious panademic issue.