Macro Tsimmis

intelligently hedged investment

SELL ProShares UltraShort Real Estate (SRS) & UltraShort Financials (SKF)

Posted by intelledgement on Tue, 16 Dec 08

OK, we still think the odds favor a long and deep recession and a secular decline here. But for now, “obtimism”—the optimistic expectation that some combination of the TARP funding from Treasury, intervention by the Fed such as today’s decisions to cut the interest rate on Fed funds to zero and to buy mortgage-backed securities, and the forthcoming stimulus package from the incoming Obama administration will turn things around in the latter half of 2009 and by 2010 we will be back to normal—obtimism reigns supreme.

The problem with obtimism is…well, actually, there are several problems. However, none of them speak to why we are stepping aside on these short positions today in the wake of the Fed’s latest attempt to sweep back the tide.

Like most investors, we have been singed by the fires of 2008, and we are closing these short positions today not because we believe the fires are out, but because this deluge of credit is likely to have an ameliorative effect in the short run, and thus we expect an upward bias in the market until it becomes clearer that obtimism is misplaced. We expect to be back here, probably as soon as next month, probably at better prices.

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