Thursday, March 5, 2009

Tim Geithner Did not Save Us After All

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Remember, when he who would walk on water with the speech to save us was set to be unveiled? The market rallied in anticipation of magical words solving all our problems [Jan 27: We are Saved. Version 21, 287]

Financial stocks are happy after hours as details of the government's plan to overpay for bad assets with your grandchildren's money.... err, I'm sorry - as details of the government's plan to make excellent long term investments emerge... i.e. "the bad bank".


Remember, it's not the first 21,286 solutions that matter. It's the 21, 287th.


"We're saved! The Fed is cutting rates"
"We're saved! They rescued Bear"
"We're saved! Some sucker (BAC) bought Countrywide"
"We're saved! Fannie and Freddie taken over"
"We're saved! AIG solved"
"We're saved! Lehman now gone"
"We're saved! Merrill sold to Bank of America"
"We're saved! The Fed is backstopping commercial paper"
"We're saved! The Fed is backstopping money markets"
"We're saved! Wachovia sold to Wells Fargo"
"We're saved! TARP is passed"
"We're saved! Citigroup backstopped and given new loans"
"We're saved! Bank of America backstopped and given new loans"

I left out about 15 other instances, but you get the point. We rally on each one as the lemmings clap and nod their head - time to buy stock. Just add this to the list.


Worshiping false idols is dangerous. I have said continuously that when the market finally realizes the problem is larger than the government and there is no knight in shining armor we'd really see people give up (selling). It looks like that realization is sweeping over the land.

Since Tim Geithner has opened his mouth the S&P has fallen from 870 to 682; thats nearly 22% or a full bear market Tim. I am not placing the blame on him; I am just shaking my head at the excitement over his magical speech and 'thesis' buying, even to this day. We also rallied 3-4% in an hour when he was announced late in 2008 because after all - he walks on water and the government will make all our problems go away. If its not one Treasury secretary its another - someone will save us. False idols.

As for the fund, well I got Charlie Browned yesterday. [Feb 5: Charlie Brown Market] Lucy put the ball down - we had that cute reversal and after standing on the sidelines perfectly hedged for week after week after week (nearly 2 months) - we fell for it. And got clobbered today for a 3.7% loss which is more than the whole year combined before today. Humbug. It is a very rough market - and even 1 day of being wrong can decimate your capital. So I'm sort of peeved about that... but as a country it really is getting bad now. [Feb 4: Americans Lost $10.2 Trillion in 2008] The worst January on record has been followed by the 2nd worst February has been followed by the worst start to a March.

As for tomorrow we will have a roaring bad employment number - as always, it won't be the number but the reaction to the number. Almost all my conditions for a bottom are falling in place - we now are seeing the panic selling and except for a handful of names; most of the generals (leadership/hide out stocks) are now being smoked. Still some holdouts in technology but I'll consider this "close enough". From here it's not going to be so much buying but an exhaustion of selling we want to see - all these silly "up 1%" premarket moves after 4% down days are just prolonging the process.... hopefully the band aid is ripped off and we can put in an intermediate bottom.

Hopefully this is worth it for the firms and people at the top of said firms (along with the regulators, and credit agencies, and politicians and consumers who themselves were greedy or financially illiterate). Some small percentage made boffo bucks on the way up (glad we could all help buy the mansions, art, and yachts), but now all the peons get to suffer on the way down.

Just remember times like these when the Kool Aid is flowing and some magical speech or proposal will be presented to "save us". Onward to solution 21,288.

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