More Socialism To The Rescue

by Larry Levin


Today was another very volatile day in the SP pit at the CBOT. The SP volume was very heavy today right from the open, which led to volatile swings both up and down before the first hour of the day had ticked off the clock. However, the enormous one-way volatility (rally) didn't start until Hank Paulson spoke this afternoon. Like my guess at the end of yesterday's missive, apparently the new accounting rules will not apply to Fannie Mae and Freddie Mac.

The Federal Reserve, which is becoming more and more a part of the actual government, is asking for more power today. In a speech this morning Chairman Ben Bernanke endorsed the idea of sweeping new regulatory power for the Fed. Holding the Fed more formally accountable for promoting financial stability makes sense only if the institution's powers are consistent with its responsibilities, he said.

Bernanke also said the Fed is considering extending its emergency loans to broker-dealers beyond 2008. We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, he said. We knew that was coming - didn't we? Long live the Socialism - right here in the USA . Umm, when can I have my losses socialized by the public, yet keep the profits for myself? When pigs fly, I'm sure.

I agree that there must be more regulation over investment banks. How can they expect to use the Fed's balance sheet with no repercussion? And after all, Wall Street has proven time and again that it cannot control itself; it will regularly blow up bringing us all down the drain with it.

However, what I am a little concerned about is if the Fed gets more regulatory power as opposed to the SEC or something completely new, how long will it be before Congress looks at the Fed as just another branch of the government it can cajole at its every whim? Then, I wonder, how long will it be before Nancy Pelosi or Harry Reid start deciding the country's interest rate policy?

Late in the afternoon, comments from Hank Paulson helped drive the wild buying into the close. He reassured his audience the government is doing everything it can to use YOUR MONEY to keep those who bought too much house in order to keep up appearances. Were you asked if that was OK? Did you vote your tax dollars away for this? Oh well, you don't get to vote in Socialist/Marxist issues - it's done. Although his comments didn't specifically say it, many analysts said later that part of his speech was intended to imply that the new governmental accounting rules that will affect other institutions will not apply to FNM and FRE. How convenient.

Regardless of the news one should follow the trend, which may be temporarily changing. I say that because today's volume was huge and the market closed near its high. If there aren't any negative earnings surprises over the next few days, (how could there be with expectations conveniently lower than ever?) we could see the S&P futures trade at or above 1300.00 to 1310.00 very quickly.

Real Time Trading Signals*for

Trade Date: 7/8/08

E-Mini S&P Trades*
(before fees and commissions):

1) PP sell @ 8:45am at 1256.50 = b/e & b/e

2) PP sell @ 910am at 1255.75 = +5.75 & +8.50

3) IDVA buy @ 11:45am at 1257.00 = +1.50 & b/e

4) OTF sell @ 1:30pm at 1256.50 = -1.25 (1 lot)

5) PP sell @ 2:20pm at 1271.00 = b/e (1 lot)

6) Algorithm trades (6)...combined total...+21.50


E-Mini Russell Trades*
(before fees and commissions):

1) No ER trades were made today.


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