AN ELEPHENT- OR A DONKEY-RALLY?

RALLYING STEEL
As expected, steel stocks move strongly this morning after DFS’ Q3 results. A major consolidation in the sector also helped. It is tempting to put out a little, but such temptation should be resisited as a number of strong earnings will come this week. Also the overall market has declined materially, and it could snap back at any moment.


ELECTION
My sense is that the market will struggle from here until election, when it will attempt to rally, regardless who the winner is, although a Bush-rally probably will be broader, and have stronger legs than a Kerry-rally. Given that, I believe we should increase exposure in high-beta stocks, and again, I think ATY would be an ideal candidate because (1) it has high beta; (2) there is no earning risk; (3) SOX is pretty depressed; (4) reasonable valuation; (5) institutions love it; and (6) there are not too many high beta stocks here to choose. I would like to increase the exposure of ATY for a trade, as long as exposure is reduced.