Banks lead the way

Positions
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+100 GS @ 82.36, cost @ 74.79, increase stop to 75
+1000 UCO @ 8.54, cost @ 6.70, stop @ 7.70

Markets
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An uplifting Citi memo essentially sparked a much needed 4% plus rally across the board. Why such a big move? First of all, this is an extremely oversold market. Markets have been pummeled since Tim Geithner's vague bank rescue plan on February 8th. Most banks have lost 40% since that day and the S&P500 was off 22% since the now infamous "bank rescue" announcement.

Citi, after the latest government rescue plan has been criticized for having a weak asset base. A large percentage of total assets are Deferred Tax Assets (DTA). DTAs are prior period tax losses that are used to reduce/eliminate taxes payable if the company should return to profitability. However, if a company with DTAs is not expected to regain profitability, then a contra-account, valuation allowance, must be increased as a direct hit to net income. So DTAs are only valuable if a company exhibits future profitability. News of Citi's apparent profitable start to 2009 was thus very uplifting and helped spark a global rally in equities.

Short-covering helped build large early gains and we'll see if the momentum can last throughout the session. No doubt, we'll see more negative economic data, more job losses, and deteriorating economic fundamentals. At some point, valuations will be discounting all future negative data and forecasts will be so weak that actual reports beat consensus estimates. At that point, we should turn higher for good.

Good luck calling it - Live from Queens
I'm still thinking happy thoughts

TM