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Santa Has A Sovereign Fund
Author: Ravi Prakash (info)
Website: http://www.optionstradinglessons.com/
Posted: December 25th, 2007 at 9:41 am EST
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I have mentioned several times in the past that all the petrodollars and Chinese trade surplus dollars will find their way back into US firms. The reason is obvious; there are better returns to be made in US corporations than in the money markets. Financial firms on Wall Street are currently a bargain and the sovereign funds are shopping.
It seems that Morgan Stanley and Merrill Lynch will see $5 billion a piece invested in their firms. Citi already got theirs. For those that think that the Arabs and Chinese are taking over America, I say “nonsense”. Remember the fear in the 80’s surrounding Japanese investments in the U.S.? This go-round is just the continuing globalization of investments which is a good thing. It expands the market for all assets – more buyers and sellers. If things were reversed we in the US would also be busy buying up everything abroad that looked like a good deal. It is just not our turn on the economic cycle.
Things did perk up in the Market this week. I had predicted the small chance of a mini-rally. The charts now confirm a little more upside in the major indices. I had also mentioned that the VIX looked liked it was going under 20 which was positive for the Market. That has happened and we may see it drop a little further. Will we see the Market beat the old highs before the end of this year? Perhaps a small rally but not new highs.
The financial firms came out with pretty pathetic earnings along with more write downs. The single exception was GS, but they got taken down along with the rest of the sector. I am watching GS and it looks like it may see a run up in the next month or so. The most heartening news last week was that people spent a lot of money in November, (incurring more debt which may hurt in the long term) but for now the Market loved that news. Consumer spending is one of the great drivers of GDP. Soon the bad news in the credit market will slow down. The write downs should also be coming to an end soon. All this should help the major indices start a new climb up, sometime next year.
Is the Stock Market in a Bear Market or Bull Market? I believe we are still in a Bull Market and we will see the DOW much higher in 2008 and 2009. This is in great part due to the spending ability of the baby boomers. That party will slow down as they move to full or part-time retirement in the next few years. When the retired population matches or exceeds the working population, the economy will be in trouble. Since I believe the markets will go up much higher in the coming years I do not mess with my long term investments. If you own good stocks be patient and you will be rewarded. However, my day to day living as an options trader is a different story
Next week is a short week, only 3.5 days of trading. Volume will be light and anything is possible when the junior desk jockeys are in charge. They may push the market up some more.
I Wish You All A Merry Christmas!
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