The key is, when will the shorts capitulate. Some weak hands may have covered friday, but I'll bet a majority of the funds still have their financial shorts on. There will be some interest in the next week or 2 to drive these financials to the point where every last stubborn short is squeezed out. Then we will see the mother of all crashes when the shorting is allowed to resume. In the meantime enjoy the mother of all squeezes, goldman may get their dow 14k by the end of the year.
Yes it will matter because your home will lose value, the dollars you make on your "winning trades" will be worth shit, the public services you've grown accustom to will be no more, crime will sky rocket, and the best you can hope for is to be a prisioner behind the walls of your Gated Community. But your win/loss ratio will be jammin'.
Are the new regulations and bailout projects going to cause financials to turn a profit? Or are they just going to keep the doors open. The government doesn't care about equity stake holders, they care about policy holders, account holders, and a percent of the debt holders. They may be preventing a financial collapse but to me that doesn't mean the financials wonât be socialized. This plan shows that financials need a lot of help, not that they are a good investment. This is just one step in what has been and will continue to be a massive government subsidization. I may be completely wrong, it might all be written off by now, but thatâs what they said in January too. The bottom line is, the shorts aren't going anywhere until the fundamentals change. If the financials rally, thatâs just going to make it more enticing to short. Everyoneâs looking and the bond insurers. What happens if they get subsidized? The good thing is that at least money is starting to flow back into the States on a massive scale. We need it, it means that a system collapse is a less likely fraction of a percent possibility. It does not mean financials will turn a profit. It means our treasuries are safe. To be frank, I think that this has been the plan all along. We pushed the dollar down hard to get the money flowing bank in our direction in goods transactions so we could regain control over it. Once we did, we quickly started making it stronger and safer for investments to find the big money. As long as we get McCain, we are on the track of long term growth and stability. If Obama is elected hopefully they can keep him ignorant to the process during his term and continue. Let him bring back the support of the lower/lower middle class to the government, satisfying his ego without having to meddle in affairs over his head.
After the huge Thu and Fri rallies, I think we could see some profit taking early next week. But as the new bailout agency becomes closer to reality later in the week, I think stocks go higher, with financials possibly going higher than their Friday highs. Then after the bailout plan is finalized, and the end of the shorting ban, could resume the downtrend.