The market is healing and no one is noticing…Remember, watch what people are doing, not what they are saying.

1. Goldman Sachs is dying to pay back $10 billion in TARP money, they would do it today because they could be out there making a killing if it weren’t for TARP restrictions.

2. Morgan Stanley announced on 2/10 that they want to repay TARP funds as well.

3. Barclays had a great quarter and reiterated they don’t want UK bailout money.

4. Ken Lewis of BAC claims they don’t want any more TARP money, but the jury may still be out on this one. Plus, he has taken his own money and bought over $1million worth of BAC stock recently.

5. Jamie Diamond at JP Morgan laughs at all the talk of nationalizing banks and says they are doing fine and lending money out everyday.

6. Libor has fallen to very reasonable rates, meaning banks are lending money to each other at a pretty reasonable and doable rate

7. Corporate bond insurance, or credit default swaps, have dropped at a staggering rate over the past 6 weeks, meaning the threat of default on quality companies’ debt is view as very minimal.

8. Junk bond yields, although still attractive, are plummeting as investors pour into certain sectors chasing yield.

9. The Bad Bank idea seems to have taken a backseat as it might not be as “needed” as some though, now government partnerships and handshakes seem to be all that might be needed to get over the credit freeze hump.

10. Goldman Sachs and others have estimated the true number to get this mess in the rear view mirror is $4 trillion and guess what? The market moved 20 points. What else can be thrown at this market to drive it to Dow 6000 if we assume $4 trillion of debt and 12% unemployment? Seriously, leave a comment and let me know what scenario can shock the market down to 6000? I am not saying we won’t test 7500 or even 7000 again, but overall, I don’t see what can put us to some of the Dow 5000 or 6000 pundits out there.

Just added

11. After seeing Tim Geithner’s speech yesterday, as shallow and empty as it was, I have to say it proves my point. The Obama administration comes out with the turkey, and yet the market can’t be driven down past 7850.

Really?? What else can they do to mess this up?

It reminds me of Brewsters Millions with Richard Prior, it’s like they are trying to get the Dow to 5000 and just can’t do it.

jackson’s this is it

Morgan Stanley
Senior Floating Rate Notes due 2012
Non-Callable U.S. Inflation Index Linked Range Notes

This looks like a serious no brainer. We have CPI at or below 1% and crashing down.  We have Bernanke talking in London about how he will raise rates quicker than you can say “Paulson’s Plan” as soon as a recovery has started to show its early face.  The government and Wall Street are clearly worried about deflation (ie massive stimulus) than inflation right now.  So you are telling me we are going to go through a deflationary cycle, turn it around, show enough growth to start raising rates, and then have CPI shoot through 7%…all in 36 months?  That is the life on the note.

All you are betting on here is Morgan Stanley doesn’t go out of business, which with there recent bank holding company status and merger with Smith Barney, seem like a pretty good bet.

I got a call today asking what I thought about using the last few trading days of the year for buying stocks.  Although no one can time the market, remember it is all about “time in the market, not timing the market.”. 

On one hand we have the Obama presidency coming up and thinks are so bleak that IS it the the time to buy?  On the other, things ARE so bleak, why jump in now, as opposed to a few weeks or months from now?

Here is what I think.  A few notes, one, the US consumer is still contracting, so that is bad.  (I.E. see the retail sales figures from Christmas and the “now poplular - Who is going to close their doors” game).  Credit is still frozen, starting to show a few drips here and there of thawing, but still very frozen.  Unemployment is still going up, and I think the estimates at a 9% peak are too low.  Home prices are still falling (Can they still do that? Aren’t we at zero yet?). Retail space and commercial real estate is very much starting to show signs of trouble, starting with the malls and working its way up to office space, but…

The one reason I would not invest this week is hedge fund redemption.  All the billions of dollars in hedge funds that investors have decided to pull out get priced at the closing price of the fund on December 31.  Although many hedge funds have liquidated positions, no one knows how many more need to free up money in the next few days to pay out to investors.  Is it only a few that need to sell?  Are there some that liquidate on the last possible day based on algorithms and computer trading? Maybe.  I have no idea, and neither does anyone else really.

I think there is much more downside risk to jumping in now than waiting a few weeks.  Are you going to miss a 1000 point move up based on the above reasons?  No, probably not.  Could you get in the way of a 1000 point move down based on world wide hedge fund redemption computers selling and allocating cash? Maybe.  Why risk it over the next few days.  Relax, enjoy the new year, and get back at it on Monday.

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