The Manipulation Continues...

Good Afternoon Folks

All I can say about today is WOW! What a bounce! Stocks soared over 5% today as the "smoke and mirror" games continued on both Wall St and in Washington.

The bounce wasn't much of a surprise because we are so way oversold. I must say, I was not impressed by the move at all. It was just another "manufactured" rally that was fueled by more lies and government manipulation. The fundementals remain terrible, and the market continues to look very sick in my view.

Lets take a look what caused the moonshot today:

Citi

I had to laugh at this one:

"March 10 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit said he’s “disappointed” at the bank’s stock price, saying it doesn’t reflect the bank’s capital strength or earnings potential.
The bank has had its best start to a quarter in more than a year, Pandit wrote in an internal memorandum obtained today by Bloomberg. New York-based Citigroup was profitable in both January and February, and had $19 billion in revenue before disclosed writedowns, he added."

Quick Take:

Yippee! We made money for two months! Gimme a break. If you can't make money as a bank when you are borrowing at zero interest rates and lending at 5% then you will never be profitable! Lets not forget they are also charging all of our debt filled consumers 30% annually on their credit card balances that they are unable to pay.

The problem here is not around the ability to make money. Its all about the bad assets that Citi has on its books that make it insolvent. Its easy to make money in banking when the FED lets you have a layup with zero borrowing rates. If this company is so profitable then why is the stock at $1 a share?

Citi continues to hold billions and billions of worthless assets on their balance sheet folks. Don't be fooled by this PR stunt.

Uptick Rule:

The SEC announced it may bring back the uptick rule that was created during The Great Depression:

"March 10 (Bloomberg) -- The U.S. Securities and Exchange Commission may propose within a month that the so-called uptick rule be reinstated, as regulators aim to bolster markets roiled by the worst financial crisis since the Great Depression.

The SEC staff may advise the agency’s five commissioners to vote on the proposal at a public meeting, SEC spokesman John Nester said today in a statement. The agency will solicit public comment before deciding whether to bring back the rule, which bars investors from betting against a stock until it sells at a higher price than the preceding trade.

Lawmakers and companies including Charles Schwab Corp. pressed the SEC to bring back the short-selling restriction after the Standard & Poor’s 500 Index plunged 53 percent since it was scrapped in July 2007. House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd today said they support reinstatement.

“Short-selling has a value but it can be abused as well,” Dodd, a Connecticut Democrat, told reporters after a hearing in Washington. “In my view, that’s been contributing to some of the problem” in the financial markets."

Quick Take:

I am not opposed to this one. I don't think its going to change much in the long run. A crappy stock is a crappy stock and it will eventually be valued as such. This just slows down the process in terms of getting there. This will however prevent the short sellers from piling onto a company and driving it out of business. We need regulations that restore confidence, and this one could help.

Mark to Market/Accounting Changes

This was the third piece of the puzzle that helped take stocks to the moon. Congress announced that they plan ob reviewing various accounting methods including mark to market:

"WASHINGTON (Reuters) - A U.S. House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs, a source briefed on the matter told Reuters on Wednesday.

The subcommittee on capital markets has tentatively scheduled the hearing for March 12, the source said.

The U.S. Securities and Exchange Commission's chief accountant and the chairman of the Financial Accounting Standards Board, will be asked to testify, the source said.

U.S. industry groups have urged the SEC and FASB to significantly alter or suspend the accounting rule, saying it is undermining the government's multibillion-dollar effort to stabilize the financial sector.

Mark-to-market accounting requires assets to be valued at current market prices. Some banks say it forces them to mark down assets to artificially low prices in the current financial crisis, even when banks intend to hold the assets past the current reporting period."

Final Take:

OK Folks, this one makes me blow a gasket. Suspending mark to market would be the worse possible thing they could do. We need transparency in order to restore trust into our financial system. Eliminating mark to market accounting and allowing the "hide the sausage" games to continue does nothing but allow bad companies to hide potentially worthless assets.

This will make the market considerably less transparent and will further destroy confidence. Investors won't buy stocks unless they can properly value them. Remember Enron? This is why this rule was established. I don't think the suspension of mark to market is gonna happen anytime soon folks. Bernanke is firmly against lifting this.

This doesn't mean it can't help ignite a rally on Wall St tho!

Bottom Line:

Today's rally was explosive however I remain unimpressed. The rally was purely based on speculation and "promises" of better earnings by a large financial institution. How many "promises" have we heard out of Wall St. folks? How many companies said they were "very well capitalized" weeks before they went bust. Remember the Thain, Fuld, and the Bear Stearn promises days before they all collapsed?

Wall St has ZERO credibility as far as I am concerned so I take these profit announcements with a grain of salt. Prove it to me with a nice quaterly report and perhaps you can make me a believer!

As far as the babble coming out of Washington goes, they need to all shut the hell up. Stop telling us what you are going to do and JUST DO IT! This constant manipulation of the market is going to kill what liquidity is left on Wall St!

Both the bears and bulls are losing money because they can't make trades based off of fundamentals. They are forced to trade by what comes out of DC, and there is no consistency here. They all just love to banter and then do nothing. Stop talking and starting taking action! Turbo Timmy is the worst when it comes to being all bark and no bite.

The politicians have made it virtually impossible to trade this market. I am very close to saying the hell with it and calling it quits until all of this crap stops.

The hysteria coming out of DC is creating total chaos on Wall St. If their intention is to try and settle the markets then they need to get the hell out of the way and leave them alone!

The politicians continue to create chaos in all areas of the market: Every bailout rocks the credit market because they need to fund them, every rule change rocks the stock market because traders must adjust to the new rules of the game, and your everyday investor is now clueless as a result of both!

I really can't give you a take on the markets short term because the "noise" level is simply too high right now. I am going to pull back on my trading. I got burned shorting a little today as a result of all the craziness coming out of Washington mainly because I wasn't home to react.

Unless you are able to be at your computer at all times when you trade, I suggest you close out your positions at the end of the day unless they are long term holds.

I miss the old days where fundamentals actually mattered!

Until next time!