Gee, what a shocker. As reported by CNBC above, neither party can agree on where to price the assets that are on the banks books. Translation: The price Washington wants to mark down the assets to puts 70% of the big firms out of business. I don't see how this gets resolved folks. The bad bank in its proposed form looks to be dead.
There is only one way to solve this crisis and I will continue to harp on it. Nationalization is the only way this mess gets cleaned up. I think Washington will eventually come to this realization once they find out how fraudulent these firm were during the housing bubble.
You know its pretty clear what happened to all of us during this supposed "boom". We were all basically scammed by Wall St. You can call it "Punk'd" if you want to be hip. The public is getting increasingly more angry about getting robbed as they continue to struggle and lose their jobs. I think Washington has finally caught wind of it. The politicians are beginning to realize that they risk losing their constituents if they agree to bail out these greedy group of criminals.
Understand one thing here if this is what has happened: If it comes down to helping out their Wall St buddies vs. getting re-elected guess which side a politician is going to take? Let me answer that Alex: Wall St your screwed!
What everyone now realizes is the housing "bull market" was nothing but a fantasy. You can also call it a sham. It did nothing to grow the economy. As you can see below, real GDP growth minus the housing ATM was virtually non existent even during the boom:
What happened during the housing boom was nothing but a massive transfer of wealth from the poor to the rich. We were all basically flat out robbed by Wall St. Call it a reverse Robin Hood. Look at the wages above. Median household income really hasn't moved significantly higher in the last 40 years!
How in the hell did we ever get here folks? We make on average 12 grand a year more per household versus 1966 yet housing is probably up 20 fold over the same period. The only way we got here was through exotic lending products that were devised by Wall St to rob you of all of your wealth.
The bankers sold us this mantra: "Don't save anything America. Just invest all of your money into a house. It will double 5 years from now." Yeah right. How did that work out?
The bankers finished this game with billions and a fleet of private jets while you the people ended up unemployed with a $2500 a month mortgage that you have no idea how you are going to continue to pay.
Paybacks are a bitch and Wall St is about to learn a brutal lesson. Obama appears to be severely agitated by this whole thing. Now that Washington has gotten a chance to really dig into this problem they realize how bad it stinks. Senators are now proposing legislation that caps bonuses. As we tumble into a depression, Congress and the American people will demand that heads roll as a result of this pillaging of the middle class. They will accept nothing less!
From a trading perspective it was a very profitable day today. Once the GDP # came out better than expected and the futures didn't move I smelled blood in the markets. I took down all of my longs and went short via SDS and SRS calls. I already owned some QQQQ PUTS and SPG PUTS going into the morning.
I had some work to do in the afternoon so I sold My SDS and SRS at a nice profit once we dipped down around 120 points. I held onto the other two. SPG was the only disappointment today. They beat earnings but announced that 90% of their divi would now be paid in stock. The stock was down $3 at one point today but bounced back and closed down only $1.50 or so. I thought there would have been much more damage here considering the meltdown in financials today but I guess a beat is a beat when it comes to earnings.
I stayed short on the Q's and SPG headed into the weekend mainly because I didn't get home in time to take them down.
I don't know what Monday will bring. Closing right at 8000 makes things interesting. This is where the bulls have repeatedly defended themselves. If we break south on Monday I think we test 741 on the S&P. If we break down from there, it may be time to pay Lucifer a visit.
There is certainly a valid case to be made in the other direction. If 8000 is successfully defended, we could see a nice bounce out of oversold conditions. We also have a desperate Treasury that could roll out a bailout at any time here. I think I will most likely get out of the way and sit on my hands on Monday.
I have a busy weekend so I am not sure if I will have a chance to post anything.
Enjoy the Super Bowl and Go STEELERS!