Monday Morning Quarterback: The World's Wildest Reality Show
Government moves to shore up Citi.
"The devil went down to Georgia, he was looking for a soul to steal. He was in a bind cause he was way behind and was looking to make a deal." --Charlie Daniels
Welcome back to the world's wildest reality show brought to you by the U.S. government and your very own taxpayer dollars.
When we last left, our battered and bruised hero-the stock market-was on the Freaky Friday ropes before a well-timed announcement of the incoming Treasury Secretary saved the day. That sparked a vicious short-covering rally and set the stage for this fresh five-session set.
Last night, while most folks watched football and I taped a television segment (is nothing sacred?), news broke that the U.S. government agreed to rescue Citigroup (C) with $306 billion of guarantees for troubled mortgages and toxic assets to stabilize the bank following last week's 60% slide (and 93% drop since last year).
That's lending a bid to pre-market trading--as I write, the S&P futures are up 3%, NASDAQ futures are 2% higher and Citigroup itself is bid up 55%--and pressuring the dollar, which is indicated 1.7% lower against a basket of currencies. One morning does not a market make but the clues to the muse are nestled in our midst.
While we've been bearish for the better part of the year-OK, a few years, but work with us-we offered five potential surprises last week that could potentially play out into year-end.
Central to those thoughts was exhaustion by the U.S. dollar which, through the lens of asset class deflation vs. dollar devaluation, was a necessary precursor (but no guarantor) of higher asset classes.
This kick-save by no means rescues the tape-there are alotta holes in the financial dike and only so many fingers with which to plug them-but given the oversold condition and dire despair amongst investors, the mere whiff of optimism might be enough to turn the tide, if only for a trade.
Next up? General Motors (GM) and Ford (F), which are the other sick kids in the playground, and those looking for flies in this try won't have to search far.
As previously stated, there are a ton of structural problems, credit is getting worse and the potential for a seismic shift looms. Still, I'm wearing my metaphorical bull costume (two legs, or 50% conviction on the upside since S&P 785) and have stayed the course since Thursday despite what feels a belabored effort by the bulls.
Alas, the purpose of the journey is the journey itself and we power up this holiday thinned week with hat in hand and positive vibes in mind. Nobody is smarter than the market and we know all too well that if you don't stay humble, the market will do it for you.
We'll figure out our forward path in real-time on the Buzz & Banter and wish ye well as we find our way.
Some Random Thoughts to Start the Week:
- If admitting you have a problem is the first step in overcoming it, I suppose we should be thrilled that Ben Bernanke finally fessed that he underestimated the housing problem.
- Of course, if policy makers read Minyanville in April, 2007, they would have been proactively prepared rather than reactively scared.
- There's no pride or prejudice in victory laps nor is that our intent. We're focusing the efforts of our esteemed community on identifying solutions for our financial mess as it's not only our right, it's our obligation. If you have thoughts on how to move the needle, please pass them along.
- Does anyone else get the sense that the NY Knicks are a proxy for economic recovery? Given their bloated balance sheet, a "me now" mindset and a litany of losses, perhaps there's serendipity that they traded their stars with hopes of rebuilding a star-studded portfolio of players by 2010?
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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