A Trillion Here, A Trillion There

A trillion here, a trillion there. Pretty soon, we’re talking about real money. Treasury Secretary Geithner will unveil his plan to rid banks of their toxic assets today. And it’s expected to cost another $1 trillion dollars.  
I’m sure we’re all thrilled to learn that we’ll get yet another new government agency. It’s called the Public-Private Investment Program. It’s charged with removing up to $1 trillion in toxic assets from banks’ balance sheets. 

Oil and Recovery

Oil prices have moved over $50 a barrel. There are a few factors at work here. OPEC’s cut production. Of course, that’s been ongoing, and OPEC’s moves have done little to prop up prices as demand around the globe falls.
 

Inflation Coming?

Yesterday, the FOMC voted unanimously to buy over $1 trillion dollars in U.S. Treasury bills, corporate bonds, mortgages and consumer debt.  
Chief economist at Bank of New York Mellon Corp. called it a "Rambo Fed" move in a Bloomberg interview. He said "This is a very powerful and aggressive move…"

The Good Times Roll?

Investors let the good times roll again yesterday, pushing the Dow Industrials up over 7,400. A surprise jump in homebuilding activity spurred continued enthusiasm yesterday.  
But underlying the recent jump in the market is the hope the economy may have actually bottomed. Unfortunately, there’s no way to know. The Obama administration has been doing its best to push that message that things are getting better. And some in the banking sector are jumping on board. Let’s not forget that these players are "talking their book." Their opinions reflect what would be the best outcome for their own business, but also the business of America.

S&P 500 Support

I have never seen a company more determined to make itself universally reviled than AIG. It truly boggles the mind that anyone at AIG, especially those in the financial products division that lost $62 billion on credit default swaps in the fourth quarter alone, could think they should receive a bonus. 
I don’t care what the contract says – if you’re party to losing $62 billion in a three-month span, you get no reward. Sorry. And if you even have to ask if bonuses can be paid with bailout money that’s keeping your business going, your moral compass is seriously out of whack.

Bernanke Beats the Drum

Fed Chief Ben Bernanke keeps beating the "Recovery in 2009" drum. It seems he’s confident that the measures taken by the Fed, Treasury and Administration will free up the banking sector and get money moving again.
 

The Rally

Stocks made another impressive move higher on Thursday. I think we’re all enjoying seeing a little upside for stock prices. There is a light at the end of the tunnel. But I don’t want us to lose sight of the near certainty that at least one of the lights we’ll see in the darkness will be the proverbial oncoming train. 
Market bottoms can be difficult events to get a handle on. Bullish and bearish sentiment is in equilibrium. As individual investors, we might feel that things aren’t getting any worse, but they aren’t getting better, either. Sell-offs appear to clearly be buying opportunities (like when the Dow dropped to 6,440), but any upside is immediately suspect because there’s no real improvement to the fundamental picture.

A 34% gain in seven days

As promised, SmallCapInvestor PRO readers took their gains on Arena Pharmaceuticals (Nasdaq:ARNA) on Wednesday. The final haul was 34%. Not bad for holding a stock for seven days. I expect we’ll re-buy Arena if it drops to $4.50 over the next few days. 
I hope Daily Profit readers were able to lock in some gains on the stocks we recently recommended here.
*****The next few days should be interesting for the stock market. I’m a bit surprised that the major indices finished in the green on Wednesday. I’ll be more surprised if they finish with gains today. 

Congress will be discussing mark-to-market rules today. It’s a safe bet that some kind of easing of these rules will happen. That would essentially buy the banks some time that could be better spent than writing down assets and taking losses. And it could extend the rally. No decision is expected until April. I also think it’s safe to say that there are entities out there that would like banks to continue to be squeezed. Eventually, they will be forced to puke up impaired assets and even more impaired prices, which would almost certainly to a windfall for those with ready cash. It’s a dog eat dog world ?

Global Markets Up

Finally, early strength for stocks on Tuesday didn’t turn to weakness. In fact, stocks finished the day with a flourish to close at the highs. Textbook.  
Maybe even a little too perfect … 
Traders have been anticipating a rally for days. The shorts are all covered. Bloomberg reports that hedge fund-iteers Paulson & Co. (unrelated to Hank or Goldman) recently took the last of its 606 million pounds in profit from downside bets on English banks … 
Paulson: "Let others fight over the crumbs of profit in banking."  
& Co.: "Right you are!"  
No, a rally was coming. Who’d bet against the Dow after it hit 6,440, turning the clock back to 1996? But, more importantly, who’s going to bet that the rally keeps going now?

Stocks Up Strong

Once again, early strength for stocks yesterday quickly turned to weakness. There is a battle going on between the bears and the bulls. Despite all time lows for consumer sentiment, there is a growing number of analysts and market strategists who believe a rally is at hand. 
We’ve been seeing signs of a rally for a couple weeks now. That’s why I recommended taking a few positions in select stocks.