MWD-GS Spread Back In Line...

8 days ago, I recommended putting on the "long MWD/short GS" spread at $52/$131 respectively. Today MWD is trading at $55.70 and GS is at $129.25, which puts the two firms at roughly equal equity market capitalization, and the spread in-the-money by about 8.5%, despite some vocal protests from the "GS is the better investment bank" camp. As I have said all along, this is not an argument about "which is the fairest beauty of them all", but about relative valuation. GS is probably the better bank but not at any price.

I can't believe the USD bulls. I heard some investment banks (who were formerly massive USD bears!) came out today with a target of $1.10 for USD/Euro by 2005 year end. In my mind, nothing much, in terms of $ fundamentals, has changed, but hey, it's a free market -- let's see who is right a few months from now. I am stubborn that way. My stop loss (from my $1.175 USD short) is $1.1490. I read today that USD bullish sentiment is at a 5-month high.

As far as the SPX market direction is concerned, I would be buying deep dips toward the 1220-1215 level, heading into Thanksgiving week. This is one of those periods (Thanksgiving-Christmas) when, despite my obvious misgivings which I have explained at length before, I'd rather be with the bullish herd (who are probably going to be dead wrong 6 months from now), than being carried out, feet first, because I wanted to be a "shorting hero".