Woo-Eee! The Fed rides in to save the day!
The Fed has, (as predicted by me, but who listens to me anyway) has announced a coordinated effort with foreign CBs to inject $200Bn in additional liquidity into the markets in the form of increased reciprocal currency swaps and extended overnight lending rates to effectively 28-day lending rates – something they are calling "Term Securities Lending Facility." Call it what you want, it's FREE MONEY!
I am so relieved! I got very nervous yesterday when TXN warned after hours as I went out on a very long limb at 2:30 when I said to members: "I’m taking out my callers right now (the ones I am up more than 50% on) and looking to roll down here so this will be the last time before I give up and it will cost me a lot if I’m wrong about this but I’m just not seeing a rationale to how oil can be at $108 if the economy is so awful or how can the economy be so awful if oil is at $108 (and Elliot Spitzer can afford $5,000 hookers)?"
While our Governor may be playing with hookers it's pimp-daddy Bernanke who's shaking his money maker for the financials (and we just bought XLF calls yesterday too!). This is so great and the Dow is up over 200 points pre-market. Is it wise? Is it just? No – but it sure is fun while it lasts.
The bad news is this will punch oil through the $110 mark but I talked about my concerns there in yesterday's wrap-up but today is party day and we're going to ignore the fact that our trade deficit got worse and I will take a moment to point out right now the the new and horribly disfigured Rupert Murdoch's Journal, at 8:50 pm, with the Dow up 221 points and 20 minutes after the Fed announcement has the following headlines on their on-line front page:
New York Gov. Eliot Spitzer apologized to the public and to his family, but didn't directly address reports that he has been involved in a prostitution ring. Spitzer has been identified as one of the ring's clients cited in a legal complaint and officials said his involvement was caught on a federal wiretap. 8:48 a.m.
Inflationary pressures around the globe are adding to pressure on the U.S. dollar as central banks from China to Chile choose to fight rising prices by letting their currencies appreciate. 7:52 a.m.
The U.S. trade deficit widened to $58.20 billion in January as the price for oil set a new record, but the shortfall was smaller than expected, with exports making their largest climb in six months. 8:43 a.m.
Stock futures pointed to opening gains, though downbeat corporate outlooks and rising oil prices served as reminders of a limping economy. 8:31 a.m.
DOOM and GLOOM people, DOOM and GLOOM is being sold to you and the Journal has taken to coming on like a telemarketer for the Great Depression of 2008. It's no wonder short positions are approaching record levels and so many people are simply giving up and walking away from the markets. What Mr. Murdoch's agenda is, it's hard to say – this is why we used to be careful about who controlled the media in this country – neither foreigners or Billionaires should be allowed to own them as Billionaires are a nation unto themselves and allowing a man who controls more wealth than a million individual people to control the media is no different than handing your press over to foreign despots.
Now I would love to sit here and tell you I was right and we have hit a bottom but there is nothing natural about what is happening this morning and we have to be VERY careful and pay attention to what sticks as the morning wears on. We have to look out for signs of profit taking as well as signs that some of the gains we see may be nothing more than a short squeeze but, on the other hand, maybe I was right and all that money we saw on the sidelines is now ready to go to work as the Fed gave the strongest signal yet that they are going to defend Dow at 12,000 and the S&P at 1,300. Best of all, they finally found a way to do it without further crushing the dollar.
We don't really care what happened in Asia (up a point) or Europe (up 2% and still going) this morning as everything changed with the 8:30 announcement. Japan said adieu to Fukui's replacement as the Opposition party rejected the Prime Minister's choice. China's CPI jumped 8.7% in February and 20 people died and 150 were wounded in the Pakistani bombing of the day – business as usual in Asia.
In case you were wondering why the Fast Money crew on GE's CNBC pushes water as an investment so much – GE just announced it will be investing $5Bn in energy and water projects in Asia, Latin America and the Mideast as they further diversify away from the US – very slick!
This is a very good time to read the now finished Long-Term Virtual Portfolio review as those bargains are looking pretty hot right at the moment. TMA is up 75% pre-market and that ship has sailed and going long is probably best for those of you not crazy enough to follow me into short-term plays the past few days.
Like I said, let's not go declaring victory just yet and I'm just going to roll up my April index puts, buy out my putter and enjoy the ride on the long side, these are the gifts that the market chooses to bestow on us once in a while, let's not squander them!