Bailout Nation

Dirty politics and bail outs are all the rage, step right up and welcome back my friends to the show that never ends. Great theater for sure, and a market that will try our last nerve for sure.

The auto deal looks shaky but when all the politicos that require their mandatory face time go back behind the curtain, the deal will get done. How could they not save another broken revenue model business with no hope for any kind of organic growth for decades to come?

Today was like a slow Valium drip at times. Just a slow motion ride with quirky jerks to the up and downside. Nothing really outstanding to report as the market just traded without a lot of conviction either way. The materials acted well and I will post a really nice looking short opportunity later. Hope you had a good one, just flattish on my end.

Far Too Little Way Too Late

Nice try but guess what? The market cares nary a wit about this nonsense bailout. From top to bottom we had a 500 point move in the Dow today and part of the reason believe it or not is the "NO SHORT RULE". If folks were short, they would usually take profits into the weekend thus taking pressure off these names. Please tell me when Cox gets fired. Schmuck. Useless, no value added.

Commodities and most sectors just rolled over and gave back everything. The trading range on my favorite name, SMN, was $58-67. I was long SDS and short SRS most of the day but pressed it hard late in the day prior to the big slide. The QQQQ's closed about 50 cents above a two and a half year low so it may find some support there. We will have to see how gutsy the bears will be next week and see if they want to press their bets. Normally, as bearish as I always am, I would call for an oversold bounce but with a lack of a positive catalyst, and believe me, it won't be earnings, we have huge problems and could just continue the drift lower.

I want to thank all of you who signed up for my newsletter and I know it was promised for this evening but my older sister had open heart surgery yesterday and I have to visit the hospital this evening. I will try for tomorrow morning.

Here We Go Again

Asia got pounded as you would expect but closed above their lowest levels and our markets are up. The S&P is currently up around 27 handles obviously contributed to a possible rethinking by Washington of the bailout bill. We will find out later today if this rally will stick or not. I'm sure there is a good chance that we could be all over the place today as longs and shorts will have anxiety about the potential outcome.

As much as some on the street may ideologically bitch and moan about a bailout, it seems obvious that the market wants it to pass as evidenced by the upward spikes every time it has the slightest hope of passing. I would do a long list but I think you will just be able to grab a dart. I do believe though, that the duration of any rally will be short lived.

The Next Capitulation

First of all, the guys you will want to watch and listen to are the ones who were right on the way down, because they are probably going to be the guys who will right on the way up. And we will go up someday, if only for the reason that nothing ever goes strait down. Ironic how the people that had the courage and analytical foresight (the shorts)to ride this 3000 point ride from the top are the same folks being penalized for its perceived causation.

There is a great piece in Barrons with Richard Bernstein, chief investment officer at Merrill where he discusses his views on the market. In a nutshell, he says that inflation has never been at 5.5% with the S&P trading at 25 trailing earnings and that the global economy will be much weaker than we think. I agree, he also states that most of the analyst community will come to this consensus at one point soon. Not good for stocks of any color. We all know by now that the analyst community has a run with the pack mentality so the reductions should be fast and furious. We also know how dreadfully inept and pathetic they have been. See my Friday morning post as it validates what I am saying. He makes the logical point that if we haven't reduced estimates yet, the argument that we may only be trading at 13 or 14 times forward eps is meaningless.

Additionally,this bailout does nothing for housing or the rising unemployment rate. I think we will see more bank and hedge fund failures in the coming weeks and bank buyers have all learned how to play the game from Barclay. Wait for max pain and a drill bit share price before you make your move. Bank of America should have followed that line of thinking before they pissed away shareholder money on Merill.

Tomorrow should be a kick, I'm also curious to see what they do with the "no short rule" this week. Will they extend it, modify it, or terminate it? Maybe they will protect General Mills or Johnson and Johnson. Don't laugh.

I'm a bit long with some DDS,SSO,XLE,XME,UYG for bounce purposes only. I'm taking the rising tide approach here but I am leaving the party early.

The Buffett Bounce

Warren is doing his best Winston Wolfe as he comes in for a clean up on GS. It should definitely instill some confidence at least the outset, and we will have to see if it has any staying power. I do believe that we will catch a nice rally when we do finally get some closure on the bailout-how long it will last though is anyone's guess.