The q4 '07 rally that we expected with the first Fed ease in mid-September '07 hasn't resulted in the rally we had expected. We have sold Moody's (MCO) and Washington Mutual (WM) at higher prices than they are trading at today, since the stocks didn't rise on good news: We sold our WM in the low to mid $30's and we sold Moody's (MCO) around $40.
Our financials that have performed well are Goldman Sachs (GS), Lehman Brothers (LEH) of which we still have a modest position, Northern Trust (NTRS), Morningstar (MORN) Charles Schwab (SCHW) and until recently, American Express (AXP).
The Fed is in a tough spot, with this week's inflation data being the strongest in years, it implies that the Fed can be much less aggressive than maybe they should with the gridlock in the financial system.
A less discussed aspect of hte market action of late has been the stronger dollar: the dollar has stopped weakening, and that could have implications for energy stocks, basic materials, and other commodity-related sectors, which action of the last few years has been correlated with the dollar action.
With the S&P 500 closing Friday at 1,467, the S&P 500 is trading below where it was on September 15th, when the Fed cut rates 50 bp's to get the monetary policy easing started. That isn't a good sign.
With the Fed taking action, and the Treasury putting in place actions to help extended borrowers of subprime loans, you would think the bottom would be in soon, but let the market tell you first.
