Thursday, April 16, 2009

Interim Top

I am going to be very bold (and probably stupid) but I am calling the short term top today. This is probably more stupid because GOOG reported strong numbers and up nicely afterhours but I am going to call it anyway. I think today was it, 870.35 the interim top and we will go to at least 805 before I think we once again actually turn higher. So all my friends are rolling there eyes at me trying to be a market timer but I have a strong enough conviction I am going to go public on this call. I was shorting at the close.

So the logic is this. I think GE is going to lay a goose egg. Despite all the manipulation companies are doing, I don't see how GE has much wriggle room. The accounting has been much more aggressive. They do not account like a bank and almost everything is marked at cost. Loss provisions are 2% versus the average bank of 3%. They have Eastern European exposure which wasn't great in the 1st quarter obviously. They have massive exposure in commercial real estate which has been the one bleak spot with all the banks. Large exposure to credit cards which the defaults are surging. Then you turn to the industrial side and those companies that reported that sort of comp really have not been very good. GE is priced like everyone else, for good strong results and I think they could be less than stellar.

So then if they do miss and it is worse than expected, the will start talk about their ratings and systemic risk fears will enter the market once again. I have said this to many people but at the end of the day I think GE is a zero (could play out in a Citigroup type of scenario where the government keeps them alive but the equity is diluted to nothing). The question is timing.

So if that occurs we get a big sell off tomorrow. Next week the bank test is released which every bank is going to pass and that would be a buy the rumor sell the news type of deal where I think banks could correct next week.

So I may be off my rocker but I am calling an interim top and think we go to at least 805. I do think we will be higher after the correction.

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