Bear Market Rallies Rock

Three days in a row for the bulls, impressive. The volume was about 15% higher than the 3 month average too. I like volume, always have, it needs way more though if this can be considered "real." I had a nice day with longs in BGU and ISRG but took a small loss in FAZ near the end of the day as I tried to pick a near term top in the financials, maybe tomorrow. The S&P is now up about 13% low off the 666 figure that we printed last week. Lucifer must have got long some OEX at that level.

The ECB said they will consider quantitative easing and Bernanke is evidently going on 60 Minutes on Sunday evening. Let's hope he doesn't fumble like he did with Maria Bartiromo that time. I may have to be a little net short on Friday.

Madoff went to court today and claimed "it was me and only me", when in the history of humankind has any crook ever said it was only me? You only say that when you are protecting someone else, unless of course you think Bernie has had an epiphany and is now a good guy and is telling the truth. When the story first broke, I asked where the accountants were, this is a bee's nest, so stay tuned.

The S&P closed right on 750 and will be fascinating to see where we go from here. I could make a good case either way, but I'll just wait for Mother Market to make the next move.

Madoff Fallout?

A busy week ahead as the calendar starts off with the Fed meeting on Monday and Tuesday, and wraps up with the weekly jobless claims data on Thursday. In between, we'll get the latest on consumer prices, industrial production and home building. Almost everyone expects the FOMC to cut its target for overnight interest rates from 1% to 0.50%, but almost no one thinks the rate cut will do much good in the current environment of fear and risk aversion. Households and businesses aren't borrowing because interest rates are too high; they aren't borrowing because they are afraid the recession will worsen, and because they can't get a loan from banks that are even more afraid than they are.

Boca Raton condos have literally been put up for sale over the weekend as a result of the Madoff Ponzi scheme. Poverty happens fast when you have every dime with one investor. The fund of funds that directed money to this guy should be put out of business by the SEC but that will never happen. Hat tip to the fund of funds managers that saw the fraud and advised their clients accordingly. I don't think splt strike conversion strategies will be all the rage anymore. I also love that Ira Sorkin (former head of SEC) is Madoff's attorney. Oh, the hypocracy, Oh the irony.

Where Were the Accountants?

The Madoff ponzi scheme could become a house of cards for the market today and as Eric Bolling would say "no money for you Detroit." Today will be a confluence of events that could really knock the starch out of the market as futures are just getting killed. The question becomes, is my hedge fund clean, or is it another ponzi scheme or three card monty scam?

I used to run a fund, a big one, and I couldn't and I couldn't breath without having my attorneys and accountants sign off on things. Last night I asked the question to some of buddies, where were the accountants? Well, it turns out this morning that the accounting firm was a little two man shop in Rockland County, NY. in an eight by ten office. A fund of that size should be with a big eight accounting firm not with Murray and Harry in a small operation. You cannot pull off a scam of this size without enablers. The funds and sophisticates that invested with Maddoff should know that. Where the hell was their due dilly?

That story is still developing, but there should be more hedge fund liquidations as a byproduct of this implosion. Most investors do a "fire, ready, aim" when this stuff happens. The autos were denied, so that will also add pressure to the market, so today could really be ugly.