We had a pretty good consolidation day yesterday as the levels I posted in the morning generally managed to hold. We were looking for (and finished at) Dow 7,636 (7,660), S&P 805 (806), Nas 1,525 (1,516), NYSE 5,075 (5,064) and Russell 420 (416). As we only really fell below our expected levels in a last-minute sell-off, I was willing to consider it a win and we went fairly bullish into the close, fully covering our long DIA puts with 3/31 $77 puts at $1.55, as it seemed like too much premium to turn down for a contract that will expire in just 4 trading sessions.
Our futures were, in fact, looking pretty good until the Prime Minister of the CzechRepublicsaid: “Widening budget deficit and protectionist trade measures — such as the “Buy America” —all of these steps, these combinations and permanency is the way to hell. We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way.Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the stability of the global financial market,” said Topolanek.
Why should we care what the Prime Minister of the Czech Republic(a country with 11M people and a GDP that is less($170Bn)than AIG lost)of has to say? Well, because it’s his country’sTURN to be President of the EU! That’s right, this is like us putting the Deputy Mayor of Miami (no offense to him) in charge for a year since he was, after all, appointed bya guy who waselected by over 5M people… I’m not saying the Topalanek’s criticisms may not have some validity. Certainlyhis timing certainly could have been betterand we have to excuse him for being in a bad mood because, on justhis country’s first day on the job at the EU,HIS OWN GOVERNMENT JUST COLLAPSED IN A NO-CONFIDENCE VOTE ON HIS LEADERSHIP. Just keep this in mind as you see the markets react to his rantings (oh excuse me – I meant remarks).
I’m now declaring this a pattern, following China’s comments, that seems aimed at keeping the dollar from running away. The problem on the international scene seems to be that, as other countries are trying to raise capital by selling their own bank notes – nobody wants them. The US just auctioned off a record$40Bn worth of…