The market’s up about 500 points today. This is after a 500 point up day on Friday. So, from the bottom Friday, we’ve already rallied about 16%. Why? Because Obama is naming Geithner Treasury Secretary and because Citigroup got bailed out. So, let me get this straight. We’re happy that one of the largest financial institutions in the world had to be bailed out after saying everything was fine as late as Friday? Haven’t we seen this before? They must get a deal done by Sunday night before the Asian markets open….or else? Well, they’ve gotten “deals” done before and the market reacted similarly. Those rallies all were reasons to sell, not buy more. It’s amazing that investors aren’t learning from the past. The economy continues to slow and we’re having to bail out a huge institution like Citigroup. And, that’s a reason to celebrate? I don’t think so.
That’s like me as a Spurs fan celebrating because Tim Duncan only broke his leg. He didn’t have to get it amputated. Is that really reason to celebrate? He’s still going to be out the entire season (in my fictitious scenario). That’s what today feels like to me. It’s an oversold rally that should be sold. I shorted some on Friday and have shorted more today at the end of the day. Don’t get me wrong, the euphoria can last a little longer. But, I don’t see evidence that this is the beginning of a new bull market. Given that, there are only trading rallies in a bear market. What more do you want than 1000 points in 2 days?
As the world deleverages or reduces its balance sheet, I’m doing the same. Selling more positions and reducing my allocation to stocks. As I’ve been very light in the stock area for some time, there’s no time like the present to reduce those holdings even more.
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