Wednesday Pre-Market Update

January 28, 2009 · Posted in Uncategorized · Comment

The news that the US government is going to create an aggregator bank to buy toxic assets from distressed banks is giving confidence to global markets. The fact that they will also be buying common stock as well as preferred shares means that the US government has in essence put a floor under US financial stocks for the time being. US stocks have been inching up the last two days on significantly decreasing volume. Some global markets moved up Monday and Tuesday, all enjoyed large rallies last night. At this moment the futures are pointing to significantly higher opens that would push through some important near term resistance levels. We can expect to see short covering and new money coming off the sidelines.

In light of this news and the potential for this to become a violent, though likely brief, rally we will be exiting our SDS position and going long the S&P on a short term basis. $401k money remains in cash. Our investing style is strategic but we react tactically when necessary. This could be a very volatile session so protect yourselves if necessary. Remember if you are using leveraged products you can lose money a lot faster. Please be vigilant.

There will be an update tonight on what the new treasury strategy means for investors.

All other positions remain unchanged from our prior post.