Wednesday, January 28, 2009

Financial Stocks

At the moment, Bank of America (BAC) is up 14%, Wells Fargo (WFC) is up 22%, which is not unexpected, and financial is up all across the board. The main reason attributed to this rally in financial is the optimism that the new administration will move quickly to stabilize an ailing financial sector. However, hope and optimism are never trading strategy, and I don't expects this rally to last. The common strategy here is to buy into earning, hold it a day or two at best to see how things really play out, and then, back to the sell off. The truth of the matter is that for the economy, nothing has really change.

We are still losing jobs, banks are still in trouble, we still lack capitals, and overall confidence is low. Then we see that the new administration is planning to add about a trillion dollars ($1,000,000,000,000) to the national deficit, which mean we are potentially facing a national debt of over $10 trillions dollars. Even for a $13 trillions dollars economy, $10 trillions is a bit to much to handle, especially given the bleak economic situation we're in. Optimism? I think it is more of a delusion than is it optimism that is rallying this market.

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