Tuesday, March 10, 2009

We go higher

I'd put another giant bull on the top of this piece, but you got that yesterday.

And you got a huge move in stocks!

This weekend, Barron's warned us about Dow 5,000.

If stocks do get to a P/E of 10, the S&P 500 could drop as low as 500, a decline of more than 25% from current levels, and the Dow Jones Industrial Average could drop toward 5000.

So what. We go higher.

Roubini warned us that the Dow would hit 5,000.

So what. We go higher

Meredith Whitney warned us that we will have a $4.7 trillion contraction in credit card loans.

Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.

So what. We go higher.

Trot her out on CNBC and let her pump the bear case.

So what. We go higher.

Now Roubini and Whitney, aren't the bloggers in the "cottage industry" of bears that I talked about yesterday, but wouldn't a new bull market meaningfully impact these bears? After all, who needs "Dr. Doom" if what we need is "Dr. Boom?"

Moody's warned us today about the new "lepers." They have now published a list of "Bottom Rung" companies that are more likely to be first to default.

So what. We go higher.

Moody's estimates about 45% of the Bottom Rung companies will default in the next year. Combined these firms have more than $260 billion in bond and bank debt. A default ranges from filing for bankruptcy to a distressed debt-exchange to missing a debt payment.

Lepers? Give me a break!

Leprosy is a bacterial pathogen that attacks the nervous system and the receptors for pain. Lepers have sores and disfigurements because their system breaks down, and they can't feel any pain from their cuts and bruises. Left untreated, the sores become greater. If you want to read about leprosy, and the "gift" of pain, you can start here.

So Moody's is now going to tell us that these companies on the bottom rung that are on the default list are unaware? That they don't already feel the pain? When you feel pain, you can do something about your situation.

And right now, the whole country feels the "gift" of pain.

Which means that this leprous "bear market" is now over!

Now in "biblical" times, the leper was cured instantly.

Matthew 8:3 "...And immediately his leprosy was cleansed."

But it doesn't happen that way in the stock market. Here, the cure starts with leaks. Leaking of government intentions to participants in the stock market, and by changing psychology.

Yesterday, the market remembers Warren Buffett on CNBC and Jack Welch on Morning Joe, but they forgot the big gun in the market, Paulson & Co. who tacked on $500 million the last few weeks with his position with Rohm & Haas.

Most people, (myself included) thought this deal wouldn't happen with Dow Chemical at $78. Conditions had changed much in the world since the deal was first announced. But the deal was done, and Paulson and the Haas family get a preferred stake in Dow Chemical.

Dow Chemical followed Paulson's script!

It's easy to hold your position, when you know the other side's intentions.

But maybe, there was another "stabilizing" factor involved.

Wouldn't this deal help the psychology of the market?

Today, we heard that the government is considering revising mark to market accounting for banks, and considered bringing back the uptick rule.

Now who was the most profitable bear on the market? Wasn't it John Paulson the $3.7 billion dollar man? What if he would change his views?

Maybe he had some revelations with his meeting with Dow Chemical, Rohm and Haas, and the government meddlers!

In any event, we saw big buying, and big buying in size, throughout the day.

And the most crowded trade is too be short.

Today was the start of the unraveling of the short bet, and the beginning of a new bull market.

And it started at S&P 666, the number of the beast.

It's going to be a hell of a bull!

No comments: