Just Another Manic Monday

"Asia, when all my dime dancin’ is through, I run to you."

That’s the song investors are singing today as the Asian markets strap on their boosters and seek to join Europe in breakout mode.

The key to this is the net effect of the G7 meeting where the EU has assured the others that they are prepared to shoulder the burden of having the world’s strongest currency, a move that allows both the Yen and the Dollar to slide.  A sliding Yen keep weak dollar from killing US consumers (how many European goods do you own vs. Japanese goods?) and maintains the famous "carry trade" that allows the US to continue to find a market for its dubious debt notes as the interest spread continues to mitigate the inflationary risk (especially if they Yen stays low).

I think we have our own Super Banker, Hank Paulson to thank for this as the usual G7 finger pointing and foot stomping turned into some sort of mutual admiration society with lots of sensible statements being made by all involved.  "The current global expansion provides a positive backdrop to our discussions," he said.  Pauson maintains a China policy of talking loudly and carrying a small stick, which is a nudge-nudge, wink-wink kind of way to keep Chinese imports cheap while placating US labor unions by complaining about cheap Chinese imports.

So armed with an ‘armless outlook from the states and a subtle sign from China that they will move more money into equities (remember the $200Bn they "found" under the mattress last quarter) the Asian markets went back into party mode today with huge across-the-board gains with the Hang Seng jumping 416 points, the Nikkei up 264 and Bombay playing catch-up with a 311-point gain. 

Europe has been our market leader since March and, with a 2% jump in the Nikkei (not reflected in this chart) our markets are now 4% behind both continents since we all crashed together at the end of  February.  While they may eventually move on without us, we can expect at least a short-term attempt to make up some ground.  The banking sector in Europe is leading the market with the ABN/Barclays deal sparking the sector but not too much new M&A activity today.  Could this be because the markets don’t need a boost this Monday so all the investment bankers are saving up their announcements for a time when they will help cover up poor economic news?  No, it’s just a huge global coincidence that nothing of note was announced today…

The urge to merge is still stong in the US as SLM looks to be taken out at $60 a share ($25Bn), up 50% from Thursday’s open.  I know, you see a chart like this and you say – Oooh, I’ve just gotta get me some of that!  Are American corporations REALLY that undervalued?  Sally Mae is a financial corporation and one would think it would be fairly valued, already up from $10 in 2000 so one has to wonder what JPM and BAC think is going to happen in the student-loan market to justify a $9Bn premium on a company with $9Bn in total sales and $1.1Bn in profits.  Of course we have Google and DoubleClick while MSFT and AT&T, in an attempt to win the 2007 Irony Award, are filing an anti-trust complaint!

Anything other than a nice gain today will be a real disappointment.  There’s no particular bad news, other than for Republicans as Hillary already has $31M, more than the top three Republican candidates combined and Obama is not far behind her at $25M and even John Edwards, at $14M is ahead of all Republicans except Giuliani and he’s a NY Republican, which is called a Democrat in most parts of the country!

The chart looks good, hopefully we’ll have to break out some new levels this week – It’s a good thing we’re bullish:

It’s going to be a wacky day on Wall Street today as NJ based-traders literally can’t get to the office as many towns are flooded out.  Brokers arriving late to work can cause buying surges to come in waves so it will be interesting to see what happens this morning if the markets stay strong.

Let’s keep in mind that this is, in large part, a collapsing dollar rally so we will be surprised if oil and gold don’t fly up as well but I’m more of a mindset to get our existing picks sqared away than to jump in a bunch of new positions right now.  TSO got a downgrade from C, so perhaps they’ll only go up $1 today…

My goal today is to finish the Long-Term Virtual Portfolio summary for the member section but we have no urgency as all is proceeding as planned and the markets are flying, giving us some very good prices for May contracts to sell.  I also posted a nice, bullish round of Google plays over the weekend and non-members can go to HappyTrading’s site to see the supporting charts.  This is going to be our focus for the week unless oil finally cuts us a break.

It’s going to be an exciting week!