Wow, this week is flying!
I LOOKS, from the futures, like we are heading into a very strong open for no particular reason other than nothing really bad happened over the weekend, which is a huge relief compared to what happened over the MLK weekend so our premise that people were simply unwilling to take a chance over the three-day weekend is holding up nicely.
We had a rough weekend trying (and failing) to get the new site engine up and running so we rolled back to the same situation we've had all month, with the Basic Subscription Site up in the air for another week until they can work the bugs out so it will be business as usual (or unusual, as the case may be) for the rest of this week at PSW.
It is anything but business as usual in Cuba as Castro steps down after 50 years in power. "What does this mean for the people in Cuba?" Bush said at a news conference during his trip to Africa, which is surprising only as far as that the President knew which country Castro was from… There will, in fact, be little immediate impact as Fidel's brother Raul has been running the country since last year and will continue to do so. Cuba is where, of course, we have Guantanamo Bay and the President also said: "They're the ones who were put in prison because of their beliefs. They're the ones who have been denied their right to live in a free society…. In the meantime, political prisoners will rot in prison and the human condition will remain pathetic in many cases." Don't blame me, he really says these things, I just changed the context of the hypocrisy!
So that and WMT's in-line report are the only major news items of the day which indicates this is more a relief rally than anything sustainable if we don't break the technical levels we failed last week. Keep an eye on last Wednesday's highs to see if we are making any real progress. MBI is bringing back Joe Brown to run the company and he had just this to say: "My objectives in the days, weeks, months, and years ahead are very simple," Brown wrote in a shareholder letter released Tuesday. "Deal with the current turmoil and position MBIA to sell Triple-A financial guarantee insurance and pay claims (albeit at a lower rate)."
The Hang Seng gained 1.5% this morning in a strong session and the Nikkei followed with a 122-point gain. Inflation in China hit 7.1% in January which adds pressure for that government to tighten but Europe, after some hesitation this morning, is back on track to put up another nice day of gains with the FTSE back over 6.0000 and the DAX well over 7,000 again. CS hit Europe with a bonus $2.85Bn write-down on top of last week's numbers and BCS was no help with $3.2Bn of their own, about 20% more than estimated. BCS is heading up on the news and CS is heading down so it's business as usual in the banking sector.
In other EU financial news, Munich Re gave rough guidance for '08 and the UK took over Northern Rock while banks in general continue to have escalating issues so please remember that we could just as easily have opened down 200 points on the banking crisis as up 200 points on this tech and commodity rally, which is partly based on the grave worldwide concerns about the viability of the dollar and a very poor credit market that leaves equities "the least sucky place" to put money.
Money is also pooring back into oil today as a refinery fire and the upcoming OPEC meeting are the excuses de jour to take oil back up to retest $100 this week. OPEC President Chakib Khelil told Reuters on Monday "production is not going to increase — it will either decrease or be stable." This is not a reason to rally oil folks, they can't sell what they're making now so they have to cut back. We will short into this rally if we get a good one as we can expect XOM to buckle soon (probably before OPEC's meeting) and give in to Chavez and taking that off the table will make $100 oil impossible to maintain.
My game plan for the day is to watch and wait. We have many uncovered positions so there's no need to add a lot of risk and we'll certainly start to cover into the initial rally on any signs of weakening. Like I said, let's watch last week's highs because if we can't match last Wednesday's exuberance, then today's is certainly the irrational kind.
Be careful out there!
