Well, I’m ready for the weekend - how about you?
I think in 3 out of 4 days this week we’ve made end of day comments about how exhausting the session was and I’d love to look forward to a nice, quiet Friday but we’re already down in pre-markets (7:30) and oil has gone from up $1.70 to down .30 in the last hour so we can expect expectation to be all over the place today.
I wrote an overview of the week ahead last night so we won’t go into that again except to say that: If I were a fund manager with Billions of dollars coming into a holiday quadruple witching, end of year, expiration week where we get earnings from the volatile financial sector as well as the nations’ 2 main electronics retailers and a cross section of other industry leaders - I might not be leaving myself out on a limb today…
Don’t go by me though, I tend to be rational and that has certainly been no way to identify with the psychopaths who seem to have taken over the markets. Psychopaths is Joe Ponzio’s term not mine, so write him letters, but I mention Joe because he has been writing some great articles on options basics over at Seeking Alpha, where we are both contributors and I highly recommend them to people newer to trading and anyone who’s Blog is called F Wall Street is OK in my books!
Pre-markets don’t matter much but it looks like they are already expecting a depressing CPI report, which makes it very difficult for the Fed to keep cutting rates as banks hate inflation almost as much as they hate having people not pay them the usurous rates they were counting on getting from ARMs. CitiGroup (C) stepped up to the Federal trough and moved $49Bn worth of SIV loans onto their books, funded by the Fed’s new free money plan and I think they are brilliant to take advantage of this rather than join up with the other banks in the SIV not-so-super-anymore-fund. This is the same move already made by UBS and HBC to clean up their own mess and it’s rocketing the dollar as Citi just effectively took $49Bn of them off the market.
Members have been asking when we are going to go back to the plus side on C as we bought calls around Thanksgiving, sold them on a run to $35, then turned around and bought puts on Monday and sold them yesterday with doubles at each turn and $30 was my buy point but now we’ll have to take them as a mo play (although we still have our naked leaps so there’s no emergency, let’s make sure they have bottomed first). Perhaps the Jan $32.50s at the open, selling the Dec $32.50s if things turn south on us but THIS is finally the step that is needed to clean house, a move we expected would come with the new CEO, who want’s to get all the junk he can out of the way while he can still blame it on the previous administration.
Asia stopped falling last night for the most part but I didn’t like the way they did it as the Nikkei ran up 200 points at the open and spent the rest of the day selling off, then had a spike in the afternoon which everybody sold into, leaving the index down 22 for the day. Business sentiment in Japan is turning abysmal as there seems to be no Japanese version of Kudlow and Cramer to tell them that a slowing global economy coupled with runaway commodity prices coupled with a credit crisis is a "Goldilocks Economy."
As I often say, the story is called "Goldilocks and the Three BEARS," an economy breaking into your home, ruining your furniture, consuming all your resources and messing up your bed sure sounds like America’s economic policy but somehow I don’t see this story ending with the bears pinning a medal on us.
The Hang Seng never really pretended to rally and finished the day where it started, down 180 points, just above the 27,500 line, finishing the week exactly at the 5% rule and our members sure know what that means! We have a nice short position on the FXI already and I’ll have to look into layering it if our markets don’t recover today. Paulson is getting little cooperation from China re. floating the Yuan, which is pretty much the administration’s whole plan for bailing out the dollar. Who else went to China, hat in hand to ask the communists to help out a struggling US economy? NIXON!
(MSFT) is back in the EU anti-trust courts as Opera is now petitioning to have Internet Explorer unbundled from Windows. Europe is down again, off a minor morning recovery and they also finished the day at the 2.5% rule yesterday so let’s get really serious about our weekend covers — JUST IN CASE!
8:30 AM: Holy Cow, CPI up 0.8%, WAY UP from expected and even the core is a 50% beat a 0.3% and that is sending the treasuries flying and will probably drop the markets considerably so we should get another good test of 13,500, probably lower. While I love to say I told you so, I’m actually bored with it at this point so let’s just move along…
Energy was up a whopping 5.7% and airline fares are up 2.6% and those are in the core! We’re now working our way back into inflation numbers that are so high we have to go all the way back to Nixon to find inflation this bad. Nothing spells economic disaster more than a second term Republican folks, that’s when the corruption is totally rampant! Gasoline prices were up 9.3% so thank goodness they are not part of the core and don’t affect people or the government might have to pretend to be concerned.
It’s going to be a rocky ride today so I’m going to cut this short and try to get the $10KP and $25KP published so we can review our positions and have a battle plan for the day.
Be careful out there!