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

House of Politics

I never liked politics much. They never liked me much either. We have respected each other, though, and managed to get by in life -so far- without drama. So, I will be careful in phrasing my comment for today so as not to disrupt the status quo. That means that I will just state some facts and you -dear reader- can reach your own conclusions. Here we go:

• The sanctioning of the ‘bailout’ plan is already considered a given in the markets
• So even without going back to why the plan is essential to ensure continuity of life as we know it, it has to pass soon so that a catastrophic confidence crisis is avoided
• Hank Paulson wants the plan
• Ben Bernanke wants the plan 
• GW Bush wants the plan
• GW Bush is the President of the USA
• GW Bush asked the Senate & the House to expedite their ruminations and reach a speedy conclusion, sanctioning the plan
• GW Bush is Republican
• Republicans are blamed for the state of the economy
• Elections are in a few weeks
• The House Democrats, the Senate Democrats & the Senate Republicans pretty much are ready to sign-off the ‘bailout’ plan
• There is an increasing number of House Republicans who are not happy with the plan and have not agreed to anything yet

…Come on!

Anyway, we think this is just flirting in some kinky, political kinda way. It is going to be signed, it is going to be signed tomorrow or before the Monday open (probably the latter since all events tend to happen over the w/e lately) and then..

THEN WHAT?

Don’t know about you, but I hope for some healthy profit come sign-off and then…the news, economic indicators, analysts, interviewees etc etc will start talking about the slowdown in growth (recession?), credit troubles in consumers, housing, corporate earning blues and so on. Few more dollars available to tackle these issues, so they might print some (stagflation anybody?) or they might not.

We’ll soon find out.

•nikosgi

• Hank & Paul vs. the fat, mean Senate machine

Hank & Paul take on the Senate Panel right now, imploring for the swift sign-off of the CRAF plan. They argue that there is ‘no second-act’ to this, no alternative; the USD700bn (or much more) are less than the total cost to the average American if nothing happens and the credit-generating machine that runs on just fuel fumes right now will seize and die.

I am a supporter of the Plan. I do not think it will solve the problem fully. There is still going to be pain. The choice here is between pain and pain squared. I choose pain. More on this on the weekend piece.

• Hedge Funds : Black Hawk Down

With the credit taps closed, counterparty exposure being the key word in Banks at the moment, regulation calls spiralling and market events being politically driven (for example today we have a binary outcome, if Ben & Hank get it their way we go +300 if not -300), HFs are on the crossroads. Is this the end of an era, with the surviving HFs being larger and more-Bank like? Give us your opinion. Press the button!

• Big in Japan?: Stagflation, post-WW2 debt levels in the USA

If CRAF gets signed, as we said above, it’s pain time. National debt will hit ’50s levels, with every American owing more than 70% of the average salary. Doesn’t look good for concumption, growth, solvencies etc, does it? (rhetorical question) Economists liken this to the beginning of the lost decade of Japan (the 90s stagflation year). Is this scaremongering? Download some Alphaville and comment!

• ASE banning shorts

At midday Tuesday we heard that the Athens SE banned short selling. At that point the Dow futures rallied 50 points.  Get in!