Here We Go! Geithner Recovery Plan Rollout: Feb. 9th!

Whoo Boy!

Well its official:

"WASHINGTON (MarketWatch) - Treasury Secretary Timothy Geithner on Monday will release his "comprehensive plan" to revitalize the financial markets, a Treasury spokesman said Thursday. Geithner is expected to explain how Treasury will employ the second half of a $700 billion bank bailout package as well as other program to shock the financial markets out of the recession. The plan is expected to include a variation of a mortgage mitigation proposal introduced by Federal Deposit Insurance Corp. Chairwoman Sheila Bair, according to Senate Banking Committee Chairman Christopher Dodd, D-Conn. Treasury officials are considering a variety of options for use of the funds, including capital injections and the creation of a bad bank that could be used to buy illiquid mortgage securities from struggling financial institutions."

My Take:

Fasten your seatbelts folks! LLLLLLLLLLLLeeetttss get ready to rumble!!!!

God, if this isn't a "sell the news" situation then I don't know what is. In fact, this is worse then a "buy the rumor sell the news" situation. Its actually a "sell the rumor AND sell the news" .

The price action I saw today was really pathetic. Confidence appears to be completely shot. Stocks were pumped incessantly today on CNBC. There was wild speculation on Bubblevision that the "mark to market" accounting rule was going to be lifted. The market barely blinked on the news. Some of the financials were able to crawl into positive territory.

Word then got out that the the Democrats were going to attempt to jam the stimulus through the Senate despite strong objections from across the aisle. This rumor actually turned out to be true. What a shocker! They are voting as I type. I don't know about you guys but I saw panic in DC today. Especially from the Democratic side. Obama's comments today say it all:

"RTTNews) - President Barack Obama warned Thursday that the nation is facing a recession so deep that, without action, it could turn into one that "we may not be able to reverse." The threat of an irreversible recession that could "linger for years" is very real, Obama said, urging Congress to pass his economic recovery act.

"By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression," Obama wrote. "What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis," he added.He painted a bleak picture of the future of the economy without stimulus, predicting an additional 5 million jobs lost, and unemployment approaching 10 percent."

Quick Take:

Geeezzz...Obama makes me look like a "raging bull" when it comes to the economy. Does he actually believe that we may be facing a recession that we can never get out of? It sounds like our Prez needs to pop some Prozac! Please note that I realize that Obama is merely throwing a temper tantrum in order to get his pork filled stimulus package passed.

Folks, Monday is going to be a joke. I can see it now. The whole world will be watching as little "Turbo Timmy" steps up to the podium on Monday and begins selling our "miraculous" recovery plan that will save planet earth. I am sure the world will rejoice once he is finished!..Yeah right.

Its not gonna happen guys and gals. I gotta be blunt here so please cover your children's eyes. This is a fucking fiasco and everybody knows it. There is no recovery plan that can cure this.. WE DO NOT HAVE THE MONEY to fix what the banks have done. This is why Wall St cannot rally for more than a few hours each day. Stocks failed to regain yesterday's losses today despite all of the positive news/rumors that came out of Washington.

Can you imagine what the financials would have done 1-2 years ago if CNBC reported that the "mark to market" accounting rule was possibly going to be lifted? We would have seen a 10% bounce if not more over the next couple days. Not Anymore, in today's "digital casino" as one of my readers puts it, stocks could only manage a 100 point rally on the news even after learning that an economic stimulus could be approved on Friday.

If this isn't a lack of confidence then I don't know what is. By the way, if they attempt to suspend "mark to market" accounting and create less transparency the market is not going to rally. All of the traders know that this is exactly what Japan did. This change will do nothing but create more uncertainty. This is the last thing that the street needs.

Bottom Line:

Alrighty folks. I have been thinking about how I am going to play this. I added a short on the bounce late today. I leveraged up and bought some SDS calls. This is risky play but I think the jobs number is going to be awful tomorrow. On top of that, the sentiment on the street is terrible. I was really shocked that we didn't see a rocket ride based on the mark to market accounting rumor today. The market appears to be unable to rally.

I feel a change in sentiment in the air. The bulls have held 8000 by staying in denial and ignoring bad news. The bulls have historically rallied on "huge" rumors/interventions. The Feds have now handed them the two largest possible sticksaves out there with rumors of a "bad bank" and "changes in mark to market accounting" and stocks haven't budged. You need to start asking yourself: If all of these rumors/interventions can't take stocks higher than what will? We must take notice when the bulls fail to rally after getting two gifts like this.

Of course there are other reasons to be short.

Check out the jobless claims today:

"Feb. 5 (Bloomberg) -- The number of Americans filing first- time claims for jobless benefits unexpectedly jumped last week to a 26-year high, signaling a deepening deterioration in the labor market.

Initial jobless claims increased by 35,000 to 626,000 in the week ended Jan. 31, the highest level since October 1982, the Labor Department said today in Washington. The total number of people collecting benefits jumped to a record 4.788 million a week earlier.

Companies ranging from Macy's Inc. to PNC Financial Services Group Inc. are announcing job cuts as consumers and businesses rein in spending and that is likely to prompt even further pullbacks in coming weeks. The government is forecast to report tomorrow that the U.S. lost 540,000 jobs in January"


This was the worst jobless claims print since 1982. The economy is shredding jobs at an absolutely frightening pace as we continue to deleverage off of "bubble money". Without jobs this economy is dead with a capital D.

I kept on my SPG short and QQQQ long calls. Tech is working nicely right now so I will continue to use it as a hedge. I am not sure what I will do heading into Geithner's speech.

I am strongly leaning towards keeping on some shorts and Selling my long Q's which are up nicely. This is a risky play because Geithner's going to come out with some type of shock and awe move in an attempt to kickstart the markets.

I am leaning towards heading into this short because I simply think there are no more bullets left in the gun. I don't think the market is going to believe that Geithner's recovery plan will work. Its that simple. I have told you why it won't work in my previous posts.

When I think of the Fed/Treasury now I can't help but thinking of that story about "The little boy who cried wolf". The Fed continues to obloviate and flex their financial muscles as they fill our economy with promises of guarantees and unlimited liquidity. Yet despite their efforts, the market continues to drop like a rock. One of these days, the Treasury's going to cry "wolf" and the markets are going to ignore them and sell. I mean how many times can you believe someone's policies that have failed try after try after try?

Could Monday be the day this finally happens? It depends on what he says. His plan better get it right on the 9th. If its more garbage from the same playbook the market is going to punish him severely. If he plans on attempting to spend multiple trillions, the bond market is going to call him on it.

Lets all hope Timmy comes up with some new solutions. If its more of the same, we may see our first Black Monday of the new millennium.