Asset allocation into stocks: that's what traders want for Thanksgiving...and a few days after.
The Dow is up 7 percent this week, 16 percent from Friday's lows, and up today on some of the worst economic news we have seen in this dismal year...and you can just smell it: the market is getting primed for a Bear Market Rally.
Boy, are traders ready for this one. Everyone--even the bears--think a rally of up to 20 percent is likely before the end of the year.
Everyone thinks, we deserve a rally. We are ridiculously oversold. Hell, there's good fundamental reasons we should rally: gas is half the price it was a few months ago....mortgage rates are coming down....the government is backstopping everything.
Problem is, almost no one believes this is the bottom. Because 2009 is a black hole. That's why bears are laughing at this Bear Market Rally talk.
Bears agree on the rally, but not on the follow-up. Here's what they say:
1) there will be a rally
2) you will get sucked in
3) you will get crushed
4) in 2009, you will work in a taco stand.
I was out last night with one of my best hedge fund sources. He says to me, "Are all your sources as clueless as mine have become?"
Uh, on 2009, the answer is mostly yes, they are clueless. My friend is in the camp--which is currently in vogue--that 2010 earnings will be LOWER than 2009 earnings. Most of these guys are at $60 earnings for the S&P 500 next year, and 2010 could come in at $50 to $60.
This camp believes there is no hurry to buy stocks, because the market will again move down early next year, and may not bottom until October 2009.
Meantime, note the absurd percentage moves in big names since Friday's bottom: Citi up 135 percent...GM up 183 percent...Home Depot up 34 percent...JP Morgan up 54 percent...Alcoa up 42 percent....GE (our parent) up 26 percent.
You can go your whole career and not see percentage moves like that in a year, let alone half a week.
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