Tuesday, October 27, 2009

Why does this pullback smell a wee bit different?

ANSWER - cause it is.

Wednesday is a KEY day. If we can't mount a real bounce, not one of these phoney intraday BS ones, then we may be under 1050 on S & P, which is where the next real support comes into play here. Trip down to 1000 from there if that doesn't hold.

Dollar looks like it can run a bit, though they are using any rally to pile in short more. If there are any positive comments out of the Fed in support of the US Dollar it'll create a MASSIVE squeeze.

I don't think I've commented on the whole bank pay issue. I'm tired so I won't belabor it for now, but I am starting to wonder if this administration has actually started it's term. Maybe they still think Bush is in office? Maybe they all went hunting with Cheney. Whatever it is, I just don't get how these people make so many gaffes. Hey, I ain't remotely perfect, but doesn't it seem odd that in the same breath that they speak about "too big to fail" they continue to set things up so that only the few elite institutions (companies) can thrive? It has to be an across the board regulation, or none at all. I vote for across the board.

C, AIG, BAC and 4 others were singled out, with the logic being that the WFC, JPM, GS, MS of the world have repaid TARP and thus shouldn't be regulated.

Really? OK, so now what you are doing is two very bad things;

1)You are making it so that all the top people at C, AIG, BAC, et al end up at one of the elite firms because they can get paid outrageously.

2)You reward these companies that wouldn't even exist were it not for taxpayer/bailout monies, and in the case of GS and MS (GS in particular) they helped CREATE the very instruments of mass destruction that brought the countries economy to our knees.

The very same institutions that created derivatives that netted their firm and shareholders BILLIONS. Their execs BILLIONS in bogus bonuses, and now they get paid off AGAIN under the flawed logic that they should be allowed to do as they please because they "repaid" the taxpayers/us.

That is ridiculous to say the least and possibly the most flawed logic I've heard in a long time. How do you reward these firms? How are they not the ones on trial? I'm sorry, if you or I did any of these things we'd be facing the electric chair, or at the very least tasered, man.

Here is what has now been created;

1)These firms create derivatives, and help bring down the entire financial system as we know it, causing MILLIONS to suffer and causing the worst economic malestorm since the Great Depression.

2)They all but the very very elite go under, thus creating a monopoly basically, they let LEH and BSC fail, but they save GS and MS and WFC and GE and JPM.

3)On the day when GS and MS were surely going UNDER the government decides they now are going to rush in and save the markets, and GS gets a huge bounce, as does MS.

4)We give these firms taxpayer monies because their debt and derivatives levels are off the charts, again thus keeping them in business.

5)We reward them by letting them repay taxpayers at meager rates, and thus open the door for them to raise bonuses and pay to execs, and taking $16 BIL from AIG.

6)At the very least these companies should have given taxpayers a fair return on our money. They used our money to trade their way to BILLIONS in profits. Did anyone read their 10K's? Much of the profit was TRADING profits, not underwriting and such. Simple logic would dictate that US taxpayers should have gotten at the very least a legit hedge fund payout, which would be 75 to 80% of the profits. Instead, what did we get? Our money back plus a drizzle of interest?

7)They continue to borrow money at nearly 0% interest and then gauge depositors and taxpayers with absurd interest rates so that they can scramble to repay TARP. Why? Not because they want to repay tax payers, no no way, but rather so they can then pay outrageous bonuses and get out from under taxpayer thumbs.

I don't know, everyone I know, including me, makes a helluva lot less then we did a few years, or even last year. Where is it written that bankers and brokers should make these crazy salaries while people across the country get booted from their homes and while people lose their jobs at these very same institutions?

Look, I believe that if you generate money you should make as much money as possible, but the issue is that the profits generated were and still are phoney. And, many are just appointed to posts and haven't made anything for the firm.

yet, what do we do? We make C get rid of a top notch trader who actually added value and profits to C bottom line, helping to repay taxpayers because he justifiably made money and should get paid for his talents.

Did someone say "ass backwards knuckleheadedness?"

Yeah, it was me - waxie.

In the meantime as I write futures have now turned red. I suspect we try to rally at some point Wednesday, we may even hold it and squeeze, it is the 4th day and that often times is the day we bounce. But, I doubt it'll last.

The pullback smells a wee bit different, we'll see if it ends up tasting different as well, or if its just an excuse for buyers to rush in for the so-called "bargains".

Watch V earnings reaction, stock gapped down large off earnings, but then popped to nicely green fast, some like LVS may do same. Also watch $15 level on BAC as that is key for that stock.


Michael "Waxie" Parness

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