Wednesday, September 24, 2008

But Don't Call It A Bailout

The blah blah blah goes on and on and it will be solved. There will be more back room deals cut in the next day or so than in a midnight crap game in Bangkok. I'm long a bit of the index etf's for SPX and DJI and closed up.

This is such a tight trading range and almost impossible to make any real money but I got a sense that when things resolve themselves they will want a few names. One being JPM. I think at one point Paulson passed gas and it moved a point in about four minutes. Those are the tells for me anyway, and yes I did catch that point. I have two screens that I've used exclusively now for about six months, one has all the financials on it, the other has all commodities on it. That has been the only play for the last year anyway and that is where the money flow has been.

I hate following conventional wisdom with my current thought process but I do think the market is pre conditioning itself for a big move up. I'm still very bearish but I'm a trader so it doesn't matter how I make it. This is the most manipulated market in our history, with the shorting aspect out of the equation I can't make a case for doom-at least for a few days.


Jim Driscoll said...

Yeah, I agree about the big move up - but keep in mind that any disruption can just as well knock it down by 5% too.

I'm out - the sea's just too rough for me right now, and I'm getting too darn nervous about the spiking spread to trade ETFs based on swaps.

But you probably know all that.

One thing you may not know - it's entirely possible for the bailout to take another week (or 2!) to pass - I've been calling my Senators and Congressman, and they're getting pounded with feedback that makes the immigration debate look like a Sunday social. And it's all in one direction: No. Well, the feedback that isn't incoherently angry, anyway.

They'll cut a deal because they have to, but they're going to wait as long as possible, and the deal will be vicious to Wall Street. Just vicious. So expect the "deal bounce" to be no more than a couple days.

Gonna be one step short of nationalization, just you watch.

upsidetrader said...

he jim
i'll cut the trade like a ribbon at the first sign of trouble and its a one or two day hold and you are right we are now France-i figure we nationalize everything, let 25 years go by, then privatize everything, let the bankers get filthy rich on fees and start the whole mess all over again

Sean Maher said...

Agree a technical bounce is due on any hint of good news and I've closed my shorts ST, but S&P earnings forecasts of over $100 for 2009 are fantasy, and the analyst trimming will start soon until we get to $70-80 tops (GE today a straw in the wind)...hard to see the market being re-rated given extreme value in corporate bonds, so suggests 20-30% downside, you gotta sell those rallies in equities and industrial commods; for detailed analysis see my blog

John Kaighn said...

Frustration and anger are two feelings that come bubbling forth from my gut as I watch the drama unfold in regard to the rescue plan for our financial system being deliberated before my eyes. At the heart of the matter sit the two Government Sponsored Enterprises (GSE's) Fannie Mae and Freddie Mac. The utter disregard for the facts by the mainstream television and print media, Barney Frank and Christopher Dodd completely amazes me.

The implicit guarantee of government backing for mortgage securities peddled by the two GSE's, as they operated under the guise of "providing affordable housing", gave them the ability to enjoy lower interest rates on their bonds, which in turn allowed them to prevail over private companies providing mortgage backed securities. The increased leverage, lack of competition and tacit approval of their operations by politicians receiving campaign contributions through their lobbying efforts allowed their CEO, Franklin Raines, to earn over 100 million dollars, before being ousted for accounting irregularities. Now Frank and Dodd are trying to position themselves as champions of Main Street, while the financial system grinds to a halt. For a more in depth analysis of the Fannie & Freddie debacle, see the articles in the Wall Street Journal and Investors Business Daily from Tuesday, September 23, 2008.

Ben Bernancke was elevated to Federal Reserve Chairman because he was respected for his knowledge and credentials. Hank Paulson was called upon to be Treasury Secretary because of his knowledge of the financial markets. If they are this concerned about the current crisis in our financial system, I think we better stop with the politics and soberly address the situation. This is NOT a bailout of Wall Street, but rather a rescue of our financial system. If the stock market is halved again in this decade, the pain on Main Street will be devastating. We all enjoyed the rising equity in real estate from 2002 through 2006, but the sad reality is much of it was based on smoke and mirrors. Perhaps this will usher in an era of building wealth methodically through investing, rather than the get rich quick schemes of day trading, real estate flipping and other fads which have led to bubbles and busts. One could only hope!

John H. Kaighn

Jersey Benefits Advisors

The Kaighn Report

About Me

My photo
I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.