No SHOUTING please….

Do you know what today’s tame-for-recent-standards session(-s, let’s include the global markets here) reminded me of?

The day after some serious (non-celebratory) drinking. The markets were hung-over. After yesterday’s Catharsis, courtesy of the House Republicans (and I am not pointing any fingers here), there was a lot of puking, soul-searching, philosophizing and aspirin-taking.

Today everyone seemed to be quieter. Yes, there probably will be a second attempt to vote something through; sure, there might be a rate cut to boost sentiment; why not? nationalizations are happening around Europe and it’s cool; happy days, we recouped most of the losses from yesterday in our favorite financials; Hey, even oil made my day today.

But you know what? Just keep it low today..I can’t take any noise. I think I’m going down with fever from all this excitement.

Oh, and Thursday the shorts may be back.

At 1:55 p.m., 226 US lawmakers had voted against the bill and 207 had voted in favor. Republican members voted 132 against and 66 in favour.

Shock…

When the screens showed the outcome the Dow plummeted by 450 points. It seems at the moment that we stabilise at -550 for the day, which in itself is scary. It feels like living in a nightmare, with the Republicans who opted for re-election succumbing to populism and dynamitising the Plan. Not that the plan would be the Panacea of all the miseries of the financial system. But just to get an idea of the shock from this decision, when the votes were counted and the Dow plunged, I at first though there was a technical glitch with my screen as everything was at nonsense prices;CNBC changed their headline ‘bailout rejected by the House’ to ‘bailout appears to be rejected by the House’. The votes were cast, the dismissal was a fact, but no-one thought it was possible.

Awe

At least there is some stabilisation. Barring Wachovia (RIP?) that is down 82%, the other major players are still holding up (just about). I am debating with myself whether the denial of the Plan is a good thing after all. This may be the first act of the Catharsis, the shedding of risky assets, the deluge that would mark the bottom of the market. The fact that for the time being the major Banks are not 20+% down is a comfort. Think about this too: The plan was being discussed ad nauseam for some time. I think it had lost a lot of its potency in the process, and if it had passed, soon we would be moaning that things were bad. The markets would resume falling but the arsenal would be empty. There is no doubt: Capital needs to be injected one way or another to the system and everyone needs to get their act together fast.

It seems we stared at the Abyss today, and we are still alive. JUST. Fingers crossed for the rest of the week! Our sympathies of all those investors who got hurt. Keeping half my long GS and C positions open going into today proved wrong.

Things to look out for tomorrow:

• EuroBanks (especially Icelandics & UK), how will they react to this bombshell?
• Oil, it lost 10% today. It can easily bounce on good news

GOOD LUCK

•nikosgi

Closing Comment

Finished the week with gusto. Expectations of the deal getting closer to sign-off caused a rally of 300 points on the Dow. The FTSE -purely on time difference constraints- only enjoyed a half rally, but let’s wait for Monday.

I am rather confident of a sign-off during the w/e, so another exuberant sprint may follow next week. Unless the House Republicans spoil the soup. Just read what they want to see in the Plan: The Banks to fund…themselves (somebody explain to them about the TED spread, private capital (Warren?) to spend more on the markets & more & immediate transparency, reform and regulation (ok, we agree with that!)

In any case I halved my C,GS longs before the closing bell today, took some healthy profit and hope for a repeat on Monday. I will probably liquidate afterwards and try to figure out what’s next. Oh..that’s where you come in.

Watch for our weekly (longer) article this Sunday and enjoy your week end. Chill. You’ll need it. Honest.

Midday Sandwich Special

I’ll keep this brief, while I eat my sandwitch..Things are looking a bit hairy out there. The bears are mauling the bulls big time. I cannot comprehend the rationale behind the Republican backpedalling (allegedly McCain is among the stallers). read this excerpt from CNBC:

“An emergency White House meeting between Congressional leaders, Bush, Republican presidential candidate McCain and Democratic candidate Barack Obama “devolved into a contentious shouting match,” according to a statement from the campaign of McCain, who was accused by some of stalling the process”

The fact that these people have apparently not comprehended what is at stake and what delaying further can cause to the wider confidence in the markets and the system is scary. It also shows that their advisors (who believe that they gain votes by doing so) are just as ignorant.

While they deliberate the TED spread breaks all records exceeding 3%. Noone is supplying any short term luquidity apart from the already strained central banks (when will they run out of money?). Stocks brace for a bad opening and potentially very bad session. Fortis is struggling after losing 21% of its value yesterday, paired with -13% at the moment. 

Whenever you are ready honorable getlemen…no rush.  I finished my sandwitch by the way.

•nikosgi