CHESSNOID

Today was a great day on Wall Street. Even though the news coming out of the financial sector has been negative, enough positive news got investors excited. The first news was that Abu Dhabi was infusing Citibank with $7.5 billion or selling 5% of the company to them. Somehow this was interpreted positive because it is a cash injection, but I don’t see the connection on how that will help with the big loan losses coming next year as all the subprime loans reset and the housing bust continues to spill all over our stretched economy. The second piece of good news is that the federal reserve might lower the rate again on December 11. If that happens again, we will be rates from the previous years that helped drive the housing bubble.

The difference this time will be the dropping housing prices and higher energy costs and an unstable economy. Again, the federal reserve is trying to head off the recession but will prolong a problem by trying to manipulate the natural business cycle. Housing investors and speculators are still walking away from depreciating housing assets to minimize their losses and recognize the housing trend momentum is heading south. There will be no new speculators or investors in this reduced interest rate quarter. Too many people have been burned and most people realize that flip your house mentality is a losing venture for now and the near future.

I am still impressed with the 2 day gains in the stock market. I expect some investors to lock in their gains by Friday. The market’s nervousness is very sensitive right now with triple digit moves based on rumors versus economic news. I wonder if the market will rally the DJIA to 15,000 by year end.