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Thanksgiving Week….

Last week I looked at the Big Idea items that were still pending in order to get the uncertainty out of the markets, and we did get some items settled at the end of last week. For starters President Elect Obama named his economic team, which was well received by the markets. In addition he started pushing the notion that we will get a stimulus package very soon into his administration – once again the markets like that.

It feels like everyday we have had politicians talk about the TARP, stimulus package or something about the bailouts to Wall Street as well as Main Street. Despite all the changes in the TARP plan, the market has come to terms with the fact that the Government is going to throw liquidity at the problem. That was clear with the Citibank capital injection, and will probably be true next week when GM and the car companies come looking for cash. Also we have new programs that are helping companies, mainly financial institutions, raise capital. The last one was the FDIC backstopping debt offerings from GS and MS, to be followed by other issuers. GS raised $5bn in 3 year paper rated AAA, MS did the same thing. Everyday it seems that the FED, the Treasury, or the FDIC is doing something to inject capital into these institutions. As a tax payer you start to really wonder where this will take us… especially when you see the headlines from AIG, they get a $40bn capital increase from preferred shares sold to the government and they in turn use the proceeds to pay $25bn in loans from the government (yes the same government)… NICE deal.

The amazing thing is that for now the market is taking this set of news in stride. We had a nice rally at the end of last week, and we haven’t really given much back. The shorts have to cover eventually, and C at 3 or GM at 3 or any of the other stocks at depressed levels may be good levels risk reward wise. But you never really know,

Happy Turkey to all… Enjoy .. and as you know Keystone Traders will not be trading on Friday so have good long weekend.


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