The entire nation, if not the world is in the mood to celebrate the inauguration of a new President of America. Still, there's really not much to celebrate as far as the market goes. Seems the Obama rally gets pushed back again and most speculation turned for one in the week ahead. We've mentioned no such thing just because the market bounced Thursday/ Friday late, despite Financials in disarray. Many have taken this as a sign that we'll get that rally. We'll wait to see if one materializes before we'll start buying, in other words we're not positioned in equities for one over the weekend. Unfortunately, this rally potential has been dampened over the long weekend because of UK banking turmoil. Yes, we are talking about the expected 2nd banking rescue plan from the British government on heels of a massive loss from RBS (Royal Bank of Scotland). This one (bailout) is supposed to be geared more for 'people', but the losses Monday in these equities show the people don't see it that way!. Full removal of bad assets off balance sheets is needed and this didn't do it. This pretty much directly puts the spotlight back onto the same problem here and last week did not end on a high note as far as the financial plays go. In a way, the building crisis was sort of saved by this long weekend. The global bank headlines remain ominous, simple as that!
One thing we have to agree is that as soon as Obama takes up the oval office, he'll be faced with daunting tasks immediately when it comes to the founding stone of our market, financial industry. Perhaps, we feel that the Bush administrations was deliberately leaving the whole agenda to the next administration. No doubt, we feel that plans are in progress as to how the government will "help" the financial institutions, again. This is a pretty dire situation and it needs to be resolved as quickly as they can to restore whatever the confidence investors have left for this market. Strangely, given the earning season well on its way, many of the corporate mis-guidance are taking a back seat to the current financial woes. This, simply tells us how important it is to address the situation at hand, particularly with Citigroup.
At DJIM, we are maintaining our neutral stance with a slight bias to buy on weakness, just in case a rally does begin this week. We are also always looking at crude price as a way to trade off some commodity plays. As few as there are, we are also making sure we don't miss an APOL kind of earning reaction and focus on the education services stocks with 50bln of stimulus announced for education. This is a short and a historical week for America. We are hoping that the new administration team will take a better approach to handling the market problems with proposals far more sweeping than has been considered before. In any case, we have to be prepared for lots of volatility in the next little while.
Big earnings week ahead to focus on. Big tech and GE. See earnings link for names.