Thursday, August 23, 2007

Pre Market Update

Bullish markets across Asia and Europe. Shanghai has crossed above the 5,000 market. Most Asian market closed up over 2%.

The decision by Bank of America to invest $2 billion in Countrywide has boosted investor confidence. BofA has gotten themselves a great deal. Rumors of them acquiring CFC a few months back raised Countrywide stock price to $45. CFC is currently at $25. The financial sector will be strong today especially among some of the mortgage lenders like IMB WM LEND NFI FMT.

The Bank of Japan has held interest rates at the current 0.5% level signalling credit will remain cheap. The Yen is down as a result and the carry trade should continue.

Quant hedge funds including Goldman Sachs Global Equity fund had huge gains last week as the markets returned to normal. The average investor is not as lucky to be able to obtain a $3 billion cash infusion as Goldmans fund did. I don't care much for quant strategies. They could work 99% of times but, the 1% they don't, you could lose your shirt and much more. The 100 year storm happens every 100 days or so it seems.

For now long is the way to go. The markets are rebounding strongly. 13,250-13,300 is another level of resistance for the Dow. S&P has some overhead at 1480-1490. The Nasdaq at 1575. Wall Street has priced in a rate cut. If it doesn't happen we could see some more carnage in the coming months. The markets should be safe for now till the September 18 Fed meeting.

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