What Will Trigger A Broader Rally

Despite the bearish comments from many companies (I outlined them in my Trader Talk note earlier), there are a surprising number of traders who are arguing there is reason to start feeling more optimistic.

The bull case is that what is happening is:

--massive deleveraging

--reduced reliance on commercial paper (CP) market

The end result will be smaller, more concentrated businesses that are better capitalized. There may be:

--4 major banks, several important regionals

--8 airlines, all powerful

--6 major, publicly traded housing companies.

What will trigger a broad rally? Two things need to happen:

--lower borrowing costs

--resolving short-term funding issues

How can we resolve the short-term funding issues that are paralyzing markets?

--we need counterparty risk perception go away--we need to have enough guys long credit default swaps to get burned

--confidence needs to return--Charles Campbell at Miller Tabak noted that famed fund manager Anthony Bolton had said this morninghe was bullish on the UK market.

Warren Buffett commiting money--albeit with a great return--is another confidence builder. We need more.

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  • Buffett's Three Rules for Crisis Investing
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