And Then There Were None!

by Larry Levin

Over the weekend Morgan Stanley and Goldman Sachs applied for bank holding status, which was granted. First Bear Stearns went down, then Lehman Brothers. Merrill Lynch was taken under by Bank of America, and the remaining two have thrown in the towel. None of the former High Priests of Finance exist in their recent form, which means Wall Street as we knew it has ceased to exist.

The Fed granted a request from Morgan and Goldman to make the switch, subject to a five-day waiting period. This should have several impacts:

? Their primary regulator will now be the Fed Reserve, not the SEC. This will make them subject to tighter disclosure and regulatory requirements, which is obviously a good thing.

? They will be able to accept bank deposits, which eventually will make them more stable. They will also be able to more easily buy the raft of soon-to-be-failed regional banks.

? They will have somewhat permanent access to the Fed's discount window.

? Probably the most important change will be that they may be able to avoid mark-to-market accounting on Level-III assets. Banks are able to account for these assets as "held to maturity," thus avoiding balance sheet write-downs and removing the immediate need for cash.

This will cause a rapid de-leveraging by the firm, as it brings its balance-sheet metrics into line with other large commercial banks, which will likely limit profitability going forward, Matthew Albrecht, a Standard & Poor's research analyst, wrote in a report about Morgan Stanley. Goldman will also cut leverage to commercial bank levels, while the firm expands its deposit base organically and through acquisitions, Albrecht said. The company has taken these steps in response to market pressure placed on its business model. These moves will probably hamper long-term profitability.

Aw shucks, does this mean the high-flying days are over? With respect to responsibility and risk-aversion, it looks like the ex-Masters of The Universe are having their Come to Jesus Moment.

Now that the Politburo of the USSA has completely rigged the markets, investors are doing what they do best: they are finding other ways to make money now. They are not taking it lying down. Over just the last few trading days gold has exploded $126.60 per ounce and oil has moved up $30.00 per barrel. Money goes to where it is treated best, and that isn't currently in equities.

The equities game in the USSA is now based on bedrock of sand - shifting with the whims of Mikhail Paulson and Vladimir Bernanke.

But now that we know what the game is - rigging the markets and soon price fixing - comrades Paulson and Bernanke will surely be making changes. In fact, it was ALREADY reported on CNBC today that the NYSE traders are whining that something must be done about oil. I'm not exaggerating folks, there are already cries to rig the oil market but this time the Politburo will suspend buying in oil futures and oil ETFs, like the USO.

Nothing has been said of gold or silver's non-approved rally yet, but rest assured comrades, it is coming. The Politburo is omnipotent; just ask them. I say impotent, they say omnipotent (heh, heh). Because of that, we may read the following.

Decree from the Ministry of Truth:

The Federal Open Market Committee (FMOC) will henceforth have the power to permit or proscribe any and all communications or thoughts concerning any and all financial markets anywhere in the world.

Effective immediately, the following regulations are declared to be in force in the United Socialist States of America :

1. Anyone speaking, writing, or employing in any media of communication, either electronic or print, the word GOLD or SILVER shall be subject to re-education at a Ministry installation at the pleasure of the Secretary of Truth, his Excellency Mikhail Paulson, Jr. (henceforth "the secretary")

2. Anyone advocating the purchase of GOLD or SILVER as an alternative to paper instruments of investment shall be subjected to incarceration at hard labor mining GOLD or SILVER for a period of no less than five years, renewable at the secretary's pleasure,

3. Short selling of any stock is no longer allowed. Check that - no selling of any kind is allowed - only buying.

4. No certificate of deposit in any financial deposit shall be redeemed without the express permission, in writing, from the secretary or his nominee.

5. The terms down, drop, slump, fall, decline, plummet and any other word which in the opinion of the secretary shall be deemed to be a synonym for said terms shall henceforth not be used in any manner, either spoken or written, with connection to any or all financial markets anywhere in the world.

6. The buying of any and all oil contracts for the purpose of profit shall be deemed illegal henceforth.

7. Elections of any and all public officials shall be postponed until such time as the secretary deems appropriate to ensure the health of the economy of the USSA.

8. As punishment for violating Rule #2, the secretary will employ caning on said individuals, in accordance with the rules set forth at the Malaysian symposium on How to Treat Short Sellers.

Identical regulations have been enacted simultaneously in all financial markets of the world.

Signed into law on this day, Monday September 22nd, 2008, Washington, D.C. God Bless the United Socialist States of America .

For those of you who may have thought that banning short selling was a good idea, I would like to share with you what WON'T be happening in the S&P or Dow until sometime after the preposterous ban is lifted. Oil SKYROCKETED today, at one point up nearly $25.00-barrel, for two main reasons. The first is the potential of a hyperinflationary spiral being brought on by Mikhail Paulson and Vladimir Bernanke's mega-spending spree which is crushing the US dollar. But the other is that today's expiration day brought on an amazing amount of short COVERING. Those who had been profiting while oil declined fled like rats from a sinking ship.

And since being short equities is now a crime, you will not see a rally like you are used to until the Politburo comes to its senses and reverses its inane decree. It has always been my opinion that most, if not all, major stock/futures market reversals begin with short sellers exiting, which can only be done by BUYING. No short selling is good you may have thought? Be careful what you wish for, you just might get it.

What is truly appalling about outlawing the practice of short selling stocks, however, is that the government is attempting to brand it as greed, for the sole purpose of protecting the most heinous greed in all of human history!

Real Time Trading Signals*for

Trade Date: 9/22/08

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

1) VA buy @ 8:40am at 1240.00 = -1.75 (1 lot)

2) VA sell @ 9:55am at 1241.00 = +5.75 (1 lot)

3) FT sell @ 11:35am at 1232.50 = b/e (1 lot)

4) OTF sell @ 1:25pm at 1230.25 = +3.00 (1 lot)

5) Algorithm positions (4)...combined total...+6.00

ZB (30 Year Bond) Trades*
(before fees and commissions):

1) No ZB trades today...combined total...0


Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!