Random Babbling

-Solid day for the equity markets after booking more than a 2.5% gain.  This was led by major gains in the capital goods, consumer cyclicals, conglomerates and energy sectors.  Strength in these sectors would tend to be a leading indicator in the strengthening of the overall economy, which is a positive.  Banks were sluggish for the better park of the day with BKX index down 0.53%.  Goldman, which is usually a major tell for banks, keeps bumping into resistance around $145 and it seems to be putting a drag on the entire sector by the multiple attempts to break through resistance, but ultimately failing.  Recovery will not be sustainable until the banks are back on their feet.  They still hold hundreds of billions, if not over a trillion dollars in "toxic assets".  I firmly believe that banks are not out of the water yet.  They have merely gained a momentary pulse from all the drugs and medicine which are being force fed to them while on life support.  

-GM, now better known as Government Motors, finally filed for chapter 11 and the market reacted positively to this.  Conventional wisdom would say that if one of the largest industrial companies in the history of a country files for bankruptcy, stocks would go down, but that is not the case in today's market.  You have to look at it like the market is actually a breathing a sigh of relief to have this overdue filing actually begin to materialize.  Anyone with half a brain, knew this company's demise was hanging in the ballots for quite some time.  The important thing to follow with this bankruptcy is going to be all the counter-party risk exposure that investors will have.  I'd also like to note that it is non-sensical to truly believe that the bankruptcy case for one of the largest industrial companies in the world will be handled in a 60-90 day period.  As I said about the Chrysler bankruptcy...if that happens, the government has strong armed someone in the judiciary branch.

-My two cents as far as GM goes.....I believe that the unions ultimately brought this company down.  Sure the products may have been subpar, sure it's not the best idea to offer 0% financing to people who can't afford a moped, sure Hummers aren't going to sell when gas is $4/gallon, but to have your profit margins literally squeezed to almost nothing, due to the brazen negotiations by the UAW, is sickening to me.  There is no need for the employees of the company to have more pull than the actual management of the company itself.  Every time I see that Gettlefinger character on t.v., I get very upset to say the least.  The guy is a damn fool, and I know people will argue he's just doing what he supposed to for the union members, but to demolish a company so that you can have over the top healthcare and pension benefits, doesn't sound like great leadership from the head of the UAW to me.  

-Dollar keeps getting slapped around.  The strength in currencies has tended to follow natural resource rich countries like Brazil, Australia and Canada.  Since basic materials and agriculture are going to lead the globe out of this recession (depression), we are seeing strength in these currencies.  

-Treasury rates resumed their rise today after a hefty fall on Friday.  The 2/10 spread is 272 which is just 3 bps away from the all time high that we saw on Thursday.  This took place as Geithner was in China trying to persuade them to believe that China's holdings of Treasuries are "safe", the U.S. is going to cut its deficit and the Obama administration believes in a strong dollar.  The crowd simply simply laughed at him.  No, that was not a joke either.  Also, a former China central bank advisor is having a tough time believing what Geithner is preaching, asking him to provide arithmetic to show proof of how the U.S. is going to follow through on those pledges.  

-As I've said before, its imperative to separate your thoughts on capital markets from thoughts on the economy.  Once you focus on just the markets it's then important to break down your thoughts into time frames.  Short term, we have quarter end performance anxiety starting to enter the market.  Many mutual funds or hedge funds that were either underinvested or short the market are playing catch up right now.  Buying begets buying.  No portfolio manager wants to be the guy to send out 2Q statements showing paltry gains because he thought the market was going to turn or that the fundamentals didn't show a reason for the market rising.  The market obviously isn't being driven by fundamentals at this point.  It's more technicals (use as an indicator rather than a catalyst) and psychology.  Look for market strength through the end of June and into early July.  Why?  June marks the end of quarter two.  Then we have independence day, July 4th, soon after.  The most American holiday, which is why I think this may serve as an ironic inflection point for the market to head back south, seeing as there is little to no free market (capitalistic independence) left in this country.  I'd like to borrow the theory of my professor over at Minyanville, that 2009 will ultimately play out in a W shape.  The hard part is to figure out when we reach that first peak before the downside pressure becomes too strong.  

-Good luck tomorrow and let's try and stay positive through these tough times.