Friday, January 31, 2014


BTFD meets BOTBB.  Bring out the body bags.  The long equity, short bond bus had a lot of passengers on board, and it is approaching the edge of the cliff.  The bus was cruising right along since the 2nd half of 2013, and then we hit a bump in the road.  That bump is fundamentals.  Despite all the hope and talk about growth reaching escape velocity, without fiscal stimulus, the economy doesn't have the fuel.  There is no secular growth.  It can only be boosted by artificial means, monetary or fiscal.  Unless the Fed wants to make a mockery of the Treasury and MBS market by cornering it, they can't buy much more.

Yesterday, the big gap up was a warning sign that staying short throughout yesterday was going to be painful, so I waited till the afternoon to put on shorts.  I have lightened up into the red futures but I will probably put the shorts right back on after the first hour of trading.  The margined out bulls will be seriously tested today, and I don't think too many want to hold long over the weekend.  Expecting the typical morning buying on the big gap down, which should provide a chance to reestablish shorts.

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