The market is finally starting to realize the recovery will not be V-shaped or W shaped but EKG shaped. Economic apocalypse has been prevented but the rebound will not return us to our original peak anytime soon (which is implied by all the talk of a V-shaped recovery).
Rather, we are in a short period of rapidly improving results as a result of a combination of factors: the realization that the panic induced selloff priced in the end of the free world, which, while the economy is quite a basket case, is not going to implode, an excessive wind down of inventory, and considerable refundable tax credits for new cars. The operative word in that sentence is short, that is 2Q 2009, and maybe 3Q 2009 as well will show improvements over 4Q 2008 and 1Q 2009. This will be followed by a period of stagnation as the credit cycle will take much much longer this time around to rewind itself (secondary markets will remain poor).
I covered my crude short and vix long today. I'm contemplating going long JPY short GBP as risk aversion returns in ample quantity to the marketplace.
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