The Next Capitulation

First of all, the guys you will want to watch and listen to are the ones who were right on the way down, because they are probably going to be the guys who will right on the way up. And we will go up someday, if only for the reason that nothing ever goes strait down. Ironic how the people that had the courage and analytical foresight (the shorts)to ride this 3000 point ride from the top are the same folks being penalized for its perceived causation.

There is a great piece in Barrons with Richard Bernstein, chief investment officer at Merrill where he discusses his views on the market. In a nutshell, he says that inflation has never been at 5.5% with the S&P trading at 25 trailing earnings and that the global economy will be much weaker than we think. I agree, he also states that most of the analyst community will come to this consensus at one point soon. Not good for stocks of any color. We all know by now that the analyst community has a run with the pack mentality so the reductions should be fast and furious. We also know how dreadfully inept and pathetic they have been. See my Friday morning post as it validates what I am saying. He makes the logical point that if we haven't reduced estimates yet, the argument that we may only be trading at 13 or 14 times forward eps is meaningless.

Additionally,this bailout does nothing for housing or the rising unemployment rate. I think we will see more bank and hedge fund failures in the coming weeks and bank buyers have all learned how to play the game from Barclay. Wait for max pain and a drill bit share price before you make your move. Bank of America should have followed that line of thinking before they pissed away shareholder money on Merill.

Tomorrow should be a kick, I'm also curious to see what they do with the "no short rule" this week. Will they extend it, modify it, or terminate it? Maybe they will protect General Mills or Johnson and Johnson. Don't laugh.

I'm a bit long with some DDS,SSO,XLE,XME,UYG for bounce purposes only. I'm taking the rising tide approach here but I am leaving the party early.