Staring Into the Abyss

In case you missed it, the video above is Rick Santelli from CNBC voicing his opinion on TARP, the housing initiative and the stimulus package. Evidently the market mirrored his passion today as they pretty much sold everything they could. Energy showed some strength, but the toxic beast known as the financials, fell of a cliff and the XLF made another historic low. FAZ was brilliant for me again and unless the financials go zero I just don't know how much may be left for me in that one, although a total surrender of all things equity may do the trick. I've squeezed many pounds of flesh from this one, and next to SKF, it has been the greatest security I have ever owned.

Bank of America has joined his good buddies at the watering hole, AIG,FRE,FNM and C, the most expensive one is buying the booze, but BAC forgot his TARP card so as usual it's on us. I wish I took a screenshot yesterday as I opined that we may never see it at $5 ever again. My constant rant since last summer that COF would be $5 looks to be coming a reality too, amazing times for sure. The financials will soon acquiesce completely and we will know who the survivors will be by the action in their respective stock prices. The separation of the wheat from the chaff will start soon.

My Pair Trade That Never Was

How about being short FRE and FNM and long XLF going into the weekend? It looks like the government wants to pour our tax dollars down the shoot again. The two f's are probably headed to zero and according to aftermarket prices the financials are up strongly on this news. If the financials get silly on Monday, my inclination would be to short the rally.

What To Do With Fannie and Freddie ??

Barrons is out with a doomsday scenario on these two embarrassments. I posted a while back what I thought of these disasters. If they are capable of a zero bid or close to it, the put options could be a very interesting lottery ticket. Of course the options too could become zero bid and of course the stocks themselves are priced like options but I may consider a flat out spec in he Jan. puts. Just thinking out loud.

We Have Issues

Not Angelina by the way. We do have issues and they are too long to detail. Wachovia closed below $10 today. Remember I bought the calls when the stock was about $18 about two weeks ago? That will teach me to ever think things are "cheap" or "near a bottom" in this horrible market. I got the feeling at one point today that we would go down 500 and have FNM and FRE drop to low single digits. Remember what I said over the weekend. I still think these two are worthless. We need a down 500 day.

Ain't Buyin It Yet

Oil hitting a new high and FNM and FRE are way off the morning pre market highs and are pennies from their pre market lows. The XLF is also giving back their pre market gains. Stay alert, it's going to be a wild one. I'll be back to report what I'm seeing.

From The Federal Reserve Website

Release Date: July 13, 2008

For immediate release

The Board of Governors of the Federal Reserve System announced Sunday that it has granted the Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary. Any lending would be at the primary credit rate and collateralized by U.S. government and federal agency securities. This authorization is intended to supplement the Treasury's existing lending authority and to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in financial markets.

They have also been empowered to buy stock in both companies from time to time, and as they see fit. Talk about plunge protection. It will be fascinating to see how this all turns out!!

More Pain

On Thursday evening I predicted 30-50% further decline in these two walking wounded. By 8am the next morning we were 50% lower on both. It gets worse. The Times is reporting a potential $15 billion funding from the Fed, possibly as early as Monday morning. If it comes to fruition, and based on the current market caps of the two companies, the shares could drop another 60-70% based on the mind boggling dilution of it all. The taxpayers get screwed royally under this scenario and the FNM and FRE shareholders get what's on a Christmas tree---balls.

Holy S#@$ What Was That?

I just saw a clip of our President discussing his chat with Paulson and I honestly don't think he knows what Fannie or Freddie is. Maybe a new country dance or something. News is coming in rapidly and the spokesman for Freddie said they have options, like cutting their dividend. Wow, that should help for about five minutes. Maybe a couple of trailer parks in the dust bowl. Today was a beauty, and all my action happened real early, then some sideways action, then the bogus rumor that jacked everything up. I stopped trading when things started looking more like a casino than a market. Fannie just came out a second ago and told us they have loads of cash and things are fine. Where were they all day? I don't get it, I really don't. Maybe something good will come out of this weekend. I am so tempted to buy a boatload of LEH but I threw cold water on my face. We are the greatest country on God's green earth and it is an absolute goat screw trying to get our leaders on the same page. The three stooges could do a better job.

11,000

Oil is flyng and the NY Times reports that a conservatorship may be formed to save FRE and FNM. I just don't see how his will be viewed as good news as it only highlights the absolute destruction of our financial system. FNM was founded after the great depression to help home buyers and now it is being bailed out. As I said last night, the entities can be saved but probably not the shareholders. It will be interesting to see how the market views the news.

I titled this post 11000 because that is where we have the potential to trade today if the market throws in the towel. If we should break that level, look for Black Monday chatter to gain big traction and a move to 10,000. I know I sound big time gloom and doom but you know I'm a bear and you know I've been waiting for a capitulative move so we can get this party started to the upside. Until this happens ,we are only going to see bear market rallies. At the very least it will be an interesting day.

Didn't most of the pundits say this wouldn't happen yesterday?

Toast- FNM and FRE

What's another 30 to 50 % between bailouts? The entities themselves "may" be saved-but not the shareholders. I can see low SINGLE digits on both.

Choppy

Sorry for the last post, it didn't align at all, thanks Vic in Texas for the heads up. It looked fine on my computer but not to the masses. I hate when that happens. I'll try to tighten it up later. This whole Internet thing is a fad anyway. I traded about 60,000 shares today. My best days seem to be when I trade a much ,much reduced number. That's when I know I'm "on" and my entries are near perfect. When I trade more it's because I'm correcting bad entries and getting out of jams. I never get tattooed to badly because my stops are always tight, it took me time to figure that one out. I can be wrong 6 out 10 trades and still print huge loot because of that discipline. Let the winners run and kill the losses immediately. I'll get into detail on risk and money management soon. It will save your ass 100% of the time.
I was short some Fannie and Freddy early on for small gains and then they gave the microphone to Ben and Paulson and the financials picked it up a bit. I really don't know what I'll do when this group does bottom because being short the sector has been an annuity for me. I still believe I have more time though. The fact that the government wants to regulate it, is probably going to be even worse for the financials near term. The government can't manage a bowel movement let alone the financial sector. I can speak from first hand experience what a travesty the SEC is, when it comes to oversight. Look what its done to ICE the last few days(of course I was short and you heard it here first, sorry for the shameless self love). I did well with LEH short and I was lucky on UYG short on one thrust down. I did get hacked up a bit trying to get too cute with X and CLF short. What worked yesterday didn't necessarily work today. LEH really does look like the shorts know something, just a feeling. I will try to be back later.

Finacials- Buy Em Or Short Em?

The plunge protection team is are out with their blah, blah, blah today. FNM and FRE as well as some others reversed higher. I'm trying to figure out if they are giving me the gift of the trading day to short into strength or not. My get says they are shorting opportunities