gabe borenstein

Sell in May, Go Away - Fast Money Recap (4/30/08)

Quite a few predictions most of them unenthusiastic.From the Macro perspective ,the stock market had performed quite well.For all of the recessionary predictions(not a reality especially if the FED cuts rates 100bps more),the stock market did quite well.Since the FED comprehends that the economy functions well as long as financial insitutions function well ,it became an active participant in the J.P Morgan -Bear merger ,but more importantly it signalled to the markets/investors that no financial institution will be allowed to fail.True,the record open short interest in the market and specifically financial sector is responsible for irrational bearish attitudes.Psychology is not an economic reality.The monetary and fiscal policies in place ,with some further accomodation from the FED (and allowing for the lag)will contribute to a major economic rebound in the period ahead and will contribute to unprecedented rally in the U.S equity markets .The financial sector will lead that rally.Socio/economic events/upheaval in the emerging markets will result in the record demand for dollar denominated assets(U.S markets and real estate).Commodity inflation?there are no signs of demand pull inflation which would be a cause to worry.The cost push inflation that we are witnessing to date ,is a function of a unprecedented leveraged speculation.In order to resolve this phenomenon,all of the relevant exchanges(NYMEX,Comex) should impose a 100% margins on trading and unprecedented price implosion will follow allowing the FED to focus on the real iisues.To the skeptics ,I would like to point out that some 28 years ago Comex imposed 100% margins on the precious metals ,causing the silver to tumble from fifty dollars to six.So much for commodity inflation.Ther issues/problems .I have been warning about since june 2005(Mark Gilbert- Bloomberg interview,Brian Sullivan Bloomberg TV) are behind us..For all of the pessimism the U.S markets and the economy are on the verge of a major rebound.