Feeding the Pig

by Larry Levin

The banking sector took the market lower today on heavy volume. But we can’t blame it all on the banks, they had help: retail sales were just awful. Although the S&P was down a sizeable 3.35%, it all happened in the space of 90-minutes this morning. Once the initial sell-off ended, the market reverted to its recent trend of choppiness. That being said, it was a better trading day than most recently.

Shitigroup was in the news today, which was a major cause of today’s drop. Yesterday’s news of its crown jewel sale of its brokerage department to Morgan Stanley apparently fell on deaf ears. Hmm, then again maybe Shitigroup’s problems are deeper than what raising a few billion dollars can cure. You see, the Wall Street Journal reported this morning that it will soon announce measures to shed two consumer-finance units and its private-label credit-card business, and step back from proprietary trading. On the news of the split-up, shares of C fell 20%, dragging the whole complex and the market along for the ride.

If Shitigroup were in the hospital, its condition would be downgraded to Shitibank.

The “group” is being split up. It’s bankrupt. The media often portrays these banks as “troubled” or “failing.” The reality, however, is that banks like Shitigroup are not failing, but are indeed failed banks. If their only sources of funds are from politicians handing out taxpayer money, you’ve already failed, you’re bankrupt.

The media and politicians also portray these massive companies as “too big to fail,” but maybe we should look at their size and ask if they are “too big to succeed?” Their massive size invites a level of hubris that has proven dangerous.

And what happened to antitrust laws? Have ANY mergers in recent memory been denied? I can’t remember any.

Heretofore, Congress only wondered if a merger would result in the ability to manipulate prices higher in whatever industry the merger was in. Of course this is a good question, but there are others. For example, how many smaller firms will rely on this ONE massive firm for its own business? What about employees? In other words, if one company is allowed to grow so large, its impact would be hard on too many others.

But it’s too late to think about these things now. The firms are already too large and have indeed failed. What’s the current remedy? Sadly, to steal your money and feed the pig - making it even LARGER! I wouldn’t doubt if Shitigroup, excuse me, Shitibank, needs even more money very soon.

And that brings me to another behemoth in the banking industry: BAC. The hubris of Bank of America (BAC) executives led it to buy (excuse me while I laugh) Countrywide Mortgage a year ago, even though it was saddled with terrifyingly bad loans. That wasn’t enough for these executives though, they wanted more. Surely they thought they couldn’t possibly fail. (I wonder if that’s what the Shitibank execs thought just a year ago.) Last year BAC bought Merrill Lynch (MER) before it went bust. Hmm, if it was about to go belly-up, could it really be a “bargain?”

According to the Wall Street Journal late this afternoon, the government is close to committing billions in additional aid to Bank of America Corp. - further feeding the pig - to help the failed bank digest its acquisition of MER. And why is that? BAC told the Treasury in mid-December that it was unlikely to complete its purchase of MER because the brokerage firm had suffered larger-than-expected losses in the fourth quarter.

No s#*t Sherlock! How did you miss that one? Why do you think MER sold itself so quickly to the first buyer? When I am in a long trade and I want out desperately, I “hit the bid.” It is essentially getting out at the market…like NOW…whether I like the bid price or not. At least I’m out. Well BAC I’ve got news for you, you bought MER so easily because YOU were the bid; MER “hit the bid” and got the hell out of being an independent company.

Said another way, you were the sucker. In the parlance of the card player, if you look around the table and don’t know who the sucker is - it’s you! SOLD TO YOU CHUMP!

And now you’re in trouble. But why in hell is that our - the taxpayers - problem?

Yes sir, the Treasury is just making these huge firms, like BAC, even LARGER. The Journal said that any possible arrangement with the Treasury might protect Bank of America from losses on Merrill’s bad assets. And how would it do that? There would be a cap on the amount of losses the bank would have to absorb…with the federal government being on the hook for the remainder! Said another way, BAC risks little while you get the f-g shaft!

The government is fixing nothing!

Finally we have the retail sales report which was terrible. Proving once again that they are as useless as a blindfold for Ray Charles, economists missed the mark by a massive margin. These so-called experts expected retail sales, excluding auto sales (cause they were gonnna’ be real bad), to fall by 1.6%. Excluding auto sales, retail sales recorded their biggest drop since record-keeping began in the early 1990s, falling 3.1%. Economist (lol) what a job.

Previous Day's Trading Room Results:

Trade Date: 1/14/09

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

1) B/away sell @ 8:30am at 851.00 = -1.75 (1 lot)

2) OTF sell @ 10:30am at 838.50 = +1.50 (1 lot)

3) OTF buy @ 11:30am at 837.00 = -.25 (1 lot)

4) TP sell @ 1:20pm at 841.00 = -2.00 (1 lot)

5) Algorithm positions (5)…combined SofT and Algo total…+4.25

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


1) No trades today.



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