Thanks.

Sounds like a winner for ‘09 to me.

thanks

TIA

There is a nice pairs trade at some point. Long TIPS and short the 10-yr.
I started this trade but I am too early, as always.

Could the conundrum of the 10-year be simply deflation fears wringing out ALL the inflation expectations premium in the yield?

Declining earnings and multiple contraction to P/E = 8 or so are features of deep recessions and bear markets. Barry has discussed both here. This will take us lower after earnings emerge in January.

I seriously doubt if we have seen the lows in the financial stocks as long as housing declines are in full flow. Perhaps when we see a negative second derivative – i.e. a decrease in the RATE of house price declines, we may be close to the bottom, if only because the floor for the housing market will then be predictable. I expect the floor to be somewhere around the 1992 house price levels. The CDS “conundrum” lurks in the background.

I am expecting a near term pullback here (just picked up some SRS today; now 85% long:15% short) before the rally resumes in a week or so. Medium term I agree with the “year end rally” thesis. Declining VIX and market dynamics are recapitulating the March action. Longer term, I am bearish from earnings season into the spring, and I expect retests of the recent lows and a breakdown to SPX 650 area.

It is appropriate to remember that we are now in a sector-specific market and some sectors (precious metals, energy) may have already seen their bear market lows. Not for sure, but a strong possibility.

I am long COP, CHK, RTP, GDX, PAAS and some small miners. In addition I am long SRS and a bit of TBT – I am mystified by demand for the 10-year note.

Sustained dismal macro economic news and declining corporate earnings over the next 3 quarters or so. Including but not limited to, more bankruptcies, defaults by corporations and local governments, hedge fund blowups, deflation or fear of it, big new reports of layoffs after the holidays and rising unemployment, additional financial crises in regional banks and in some emerging market governments.

In short, a downward spiraling global economy that will continue to darken the mood after brief periods (such as the current one) in which hope reemerges that a recovery is nigh.

But that’s just my opinion, and I ain’t no economist and no Einstein neither, so take it for what is worth.

Full disclosure: I’m fading this rally. I’m about 17% on the short side after today, and I expect to be 100% short by the end of December, after being 100% in cash earlier this week. That is unless I get knocked out by a continued raging rally, in which case I will push out the timeframe waiting for it to fizzle.

It has all become so unclear since the October crash.

It reminds me of one of my favorite Far Side cartoons,

How fishermen blow their minds:

Fish or cut bait?
Fish or cut bait?
Fish or cut bait?