Wednesday, May 27, 2009

Crisis Over?

I am amazed at all of the cheerleaders that want to declare this economic crisis over. We are now hearing speculation that the DOW will hit 10,000 before year end and the S&P could get into the 1200 range. We won't fight the tape--but don't share the overall economic optimism. The government deficits will play a role in running up interest rates and people seem to be forgetting that rates going up will not be great for growth and expansion.

Monsanto (MON) is down in premarket trading as they see earnings in the lower end of the range. These markets seem to be discounting the fact that while certain economic indicators look improved--we still have the possibility of dismal earnings coming from some of these companies. There is money on the sidelines and it may get suckered into these markets and make them go higher. I ask the following questions when deciding if we are on the road to total recovery:

Are interest rates going to be stable?
Are the government deficits going to cause higher taxes?
Are energy prices going to be stable?
Are jobs going to improve within the next six months?

Just something to think about as all of these points will impact consumer behavior. Consumer Confidence was great according to reports yesterday. The strange thing about this recession was that it was a pocketed recession. There were pockets of strength around the country and likewise there were pockets of weakness.

I still have a good deal of my portfolio in cash and because I am worried that we could see another leg down. The futures are strengthening right now---I got short a few minutes ago and am about to get stopped out. This run is tough to fight, but you just have to keep your losses under control.

I sold FCX put spreads yesterday as I really like that stock. I have never really utilized spreads in the past, but intend to do so in the coming months as it can help reduce my risk.

blog comments powered by Disqus