7 Stimulus Trades That No One is Talking About
Michael Shulman, February 28, 2009
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How to Trade on the Stimulus Plan
Barack Obama has spoken: An architecture for a financial fix and a temporary bailout (again of Citigroup), an aggressive and deeply flawed foreclosure prevention plan, and a huge and ineffective stimulus plan.
We've seen Wall Street's reaction to his early policy moves – when they like it, the market moves up – but then fundamentals take over and the market slides. Fourth-quarter GDP was bad at a negative 3.8% -- and now we know it was really a negative 6.2%, a gigantic fall off. A trader who's a regular on CNBC has called the current market a "parlor game" with payers responding to government-driven headlines and rumors, not fundamentals. But fundamentals will win out, always.
The optimists have been flushed out of the market and it is clear more bad news and more downward action in the markets is on the way. Seriously, right now, what catalyst could spur this economy? It won't be the stimulus package – too small. Not foreclosure prevention – too few people will be reached and helped. And the bank plan bailout requires at least $2 trillion and no one wants to give that to them.
So brace yourself for more bad news and down days -- and make some money while you do so.
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