Bailout

The bailout has arrived and people may be figuring out it isn't the answer to the liquidity the banks need or the stock market.

It didn't really help the markets as they closed down 150 points. It was interesting to watch because people felt a sigh of relief early, the market was up 250 at one point during the day. Then President Bush spoke and the market collapsed. It has been that way for 8 years; every time the President comes on TV he kills the stock market.

But, I digress, I don't think people realize how hard it is to expand a business or just operate without banks loaning money.

Right now they aren't and it is throwing people into a tizzy.

If the fed doesn't make things easier pretty fast people will lose interest in the bailout the stock market will suffer, the dollar will become less valuable and inflation will be a bigger threat. We had a glimpse of that today. Our market and world markets need a strong US so there isn't a world wide collapse.

This morning most of the European and Asian markets were down 5% and the US market was down over 5% at one point. The bailout and subsequent actions need to start and then they need to work to make money more available to the general public and businesses.

Then we can get an economic footing and make job growth come back.

Will the Bailout Really Work?

The market is in trouble and I don't know what will happen. They passed the bill and now people don't know if congress will mess it up.

The fertilizer stocks got trashed today and people who made a bunch of money playing the commodity game may have been hurt bad today. Mosaic is down 37% percent today, Bunge down about the same and Potash down 30%.

It is hard to make those losses up.

Here is one sarcastic view of the bailout: http://strategerycapital.com/index.php?slug=home

Seems to be Getting Crazier

Monday was crazy after the democrats and republicans started pointing fingers when the bailout vote faded into the sunset.

Like I said the buck doesn't stop here it moves the next finger.

There isn't any musical chairs so it doesn't stop.

I worked all day in new shorts but it is getting weird when the market goes down nearly 800 points. People should be worried about the economy and some are. When the market is down so much I don't find much else to do besides work.

Slow Government

On Friday it looked like the bail out was toast and the market opened down 150 points.

I was supposed to go out for breakfast with a guy but he canceled because he thought the market would be down huge for the day. I came in and watched the market go up and down and finally close up on the day.

Now I am seeing headlines about the solar tax credits and whether they will make it through the next legislative hurdle. I am guessing it won't only because oil is at 100 dollars a barrel and why would we want to become less dependent on foreign oil in the future (sarcasm, just in case you missed it).

I am sure it isn't as simple as that.

But solar energy is important so why can't our government figure out how to help out. It doesn't matter whether it is a bail out or solar energy, things just don't get accomplished in Washington, unless our President wants to start another war.

Wrong Target

As I am sure many know, the government has intervened in a large way. I haven’t seen anything this large ever. $85 billion to AIG is small compared to the $900 billion they are going to help out financial institutions with.

When the government came out and said no short selling, well that was a bit too much.

People now have the wrong reason for the market decline. It isn’t short sellers, it is bad management decisions by financial companies such as Bear Stearns and Lehman Brothers. Those companies and others ended up making large over sized bets that nothing could go wrong. Almost all of it is real estate related. And plenty has gone wrong.

We haven’t seen the end to this crisis just because someone diverted the attention off of the financial problems to people who short stocks.

You will now get artificial up moves in stocks because people will believe these problems are over.

Banning short selling may be one of the worst ideas ever, even if it is only in financial stocks banning. Forcing people to short stocks legally is another matter and I hope that part of the plan works.

I wonder how much bad real estate paper is left to write down. It has to be more then the 900 billion. That will tell us when the market decline is over.

I think most of these moves by the government are politically motivated and they may not be in the best interests of the American people. Blaming short sellers is sort of retarded.

This week was extraordinarily stressful for traders and investors and me.

The Playing Field is Constantly Changing

I started writing the below text on Tuesday and then things got more exciting, the government loaned AIG 85 billion dollars for 80% of the company.

People have lots billions and billions of dollars. The market in general is now worried about the next shoe to drop. People are not sure if Goldman Sachs or Morgan Stanly might end up getting sold or going out of business.

The landscape keeps changing and lots of companies will be extinct.

Huge leverage will not be allowed anymore. There will likely be even more government regulation and many people will suffer. Many already are and it is sad.

I remember the crash of 87 and how exciting it was to be short and make money, and then I woke up the next day worried for America. As a Country we made it through that, this will be much harder

My original beginning went:

On Sunday it was clear that Monday would be an interesting day, Bank of America was buying Merrill Lynch not Lehman and Barclays also walked away from Lehman. Lehman has filed for bankruptcy.

AIG is having liquidity problems and between Lehman and AIG the market collapsed 500 points on Monday.

It seems as though people are waiting to see what will happen with the actual financial instruments not just the stock and companies that bought them. A lot of people will be losing their jobs and it is really a sad state of affairs. This will bring more financial oversight and more regulation.

Additionally the banking troubles are not over. AIG may get bailed out but the cost to share holders has still been huge. AIG is so large the ramifications of this company going bankrupt or something like it is unknown.

So, I have been asked how the insurance and mortgage fields break-down might affect what I do in the short market.

The insurance companies are part of a larger group called financials which would include the brokerage firms, banks, saving and loans and other things.