Brother, Can You Spare a Loan?

Good Evening Folks

Sorry I am a little late tonight. I am feeling a little under the weather.

I have come to a conclusion when it comes to my short term view on the market: I have none!

The market appears to be nothing more than a trading casino right now. I closed out most of my positions today. I held onto my SPG short and my long Q's. We continue to churn in a very tight range around the 8000 area. So far, every time we drop below 8000 on the DOW or near the 800 area on the S&P, the bulls have held serve and successfully defended.

The question now becomes is are we forming a bottoming pattern here as we continue to hold at this 7900-8000/800 area on the DOW and the S&P and begin to move higher, or do we finally break through this choppy area convincingly and prepare to head down to the November lows?

I gotta admit folks, I am on the fence here. I see valid arguments for moving in either direction once we break out of this "holding pattern". I think a lot of it comes down to the economic recovery plan. If Obama pulls a rabbit out of his hat and finds a way to sell his plan to the American people then we could see a nice bounce. If the recovery plan looks very painful for the pigmen on Wall St then we could go visit Lucifer and head straight down to new lows.

One thing here is for sure. If you try and front run this you could end up blowing up your trading account because the market has given no clear signal as to which way it wants to go. When it does, I expect a violent move in either direction. If you like to roll the dice then go ahead and front this. As for me, no thanks, I'll pass.

I refuse to get in front of this until I get a convincing signal in either direction. Maybe tomorrow will be the day that I finally get one.

Something to note from after hours: Cisco shocked the street during their earnings conference call. They announced that they expect a 20% drop in sales this quarter. Folks, this is one of the companies that the street uses as a measuring stick in terms of gauging the health of the economy. After this checkup it looks like the economy has just gotten a bad case of pneumonia! A 20% drop in sales in a blue chip company like Cisco just isn't supposed to happen! What was extremely concerning here was that they are seeing dropping demand in virtually all areas of their business. This should rattle a few tech investors tomorrow.

Anyone Seen a Bank Loan Lately?


I have been anecdotally hearing from friends that getting a loan right now is about as easy finding a liver for a liver transplant. Hmmm...Zombie banks that don't lend..Haven't we seen this before? Lets take a look at lending in Japan after their debt bubble burst:

Final Take:

As you can see, bank lending has fallen of a cliff in Japan for the last 15 years. Its been in decline for nearly 20 straight years. This is what happens when your balance sheet resembles a garbage dump. Sound familiar? This is why we must clean up our banks and write off all of our bad debts!

If we don't force them to open up their books and admit their losses, we risk a 20 year period of declining lending. Thats a whole generation of lending folks. This is why the word "deflation" scares the crap out of the Fed. When banks don't lend assets like housing free fall in price. I mean think about it, without lending how many people have the money to pay cash for a house at these bloated levels? I can answer that Alex: Pretty much no one unless you are Warren Buffet of Bill Gates.

If we don't take the pain and write off the bad debts we are going to see the EXACT same scenario here folks.

Bottom Line:

I may be on the fence as to where the markets head in the short term. However, my long term deflationary collapse seems inevitable at this point. The question now becomes: Is this a 10 year problem ala the 1970's and early 80's or is it a 20+ year problem ala Japan?

If we continue down the current "lack of transparency" path, we are headed for a generation of pain in my opinion.

Obama its basically up to you at this point:

Are you going to force the banks to take their medicine and throw out the criminals on Wall St who created this mess and then begin the recovery process?

Or

Are you going to cave in to the financial "elite" who just finished robbing our country blind and create a "bad bank" for them where they can dump all of their worthless assets onto the taxpayer ?

You better think really hard about this Obama. The taxpayer is very very tired of funding this "lack of transparency".

If you create a multi trillion dollar "bad bank" with money that we do not have, and the bond market throws a temper tantrum, you are in deep trouble and so is our way of life.

Lets all hope you do the right thing. For once: Please say NO to Wall St's greed.