By Forrest Lowell

There is one more shoe to drop before the market can truly move higher in a convincing way. In my view this Shaquille O’Neal sized shoe is the commercial real estate market. The troubles of General Growth Properties (GGP) has been well publicized, but what about the other similarly structured companies? Just as a quick comparison I have included screen shots of General Growth’s and Simon Property Group’s balance sheets. Look at the two balance sheets and tell me which one is trading at 40 cents and which one is trading at $31.50.

(more…)

My play on Wells Fargo has certainly done me well these past couple of trading sessions.  I think a lot of the easy money has been made in the short term in the financial names but it is never a good idea to get in the way of a market trading on momentum.  Also the FASB and SEC gave testimony on Capitol Hill yesterday and stated that they are going to give guidance to relax the rules of mark to market accounting in about three weeks.  I can’t help but think the anticipation of this news has been largely responsible for the rally these past couple of sessions.  This is probably one of those situations where you buy on the rumor but sell on the action.  If the financials continue to rally for the next couple of weeks I would be wary of putting new money to work for the short term.  I think many of the financials are undervalued for the long term but that does not mean they can’t have a 50% retracement once this current market bear market rally is over.  And I think it is important to note that this indeed a bear market rally, there has been no fundamental change in the economy and changing accounting rules is only going to have a short term effect on the financials.  In fact the economy is still getting worse at an accelerating rate, the first time unemployment figures this morning were even at the high end of expectations, which does not bode well for the recession ending anytime soon.  But luckily the stock market looks forward and does not necessarily reflect the economy as it is now.  If you expect a large one day downside coming soon, as I do, it is very tempting to get long the ProShares double short commercial real estate, SRS. It has gone from 110 to 60 in just one week, a bounce downward in the market could be a bounce up in this fund.  It also has had a pretty well established bottom in the high 40’s to low 50′ so your downside is potentially limited. It is a high risk high reward trade.

(more…)