On Again Off Again

by Larry Levin

You want to know about bank nationalization? Oh that little thing? It's an on-again off-again proposition as each day passes. Last Friday the market dropped as it was "on," then Friday afternoon it was "off" when the White House said "err, umm, we, umm, don't think it's a good idea." Sunday night bank nationalization was "on" again, but stocks rallied on Globex, making some think it was really "off" again. All day Monday, however, it was "on" again as the markets were pummeled to 1997 levels. (Confused yet?) Not to fear - another mouth piece of the government came to the rescue today: Helicopter Ben Bernanke. He said it was "off" again. And although he has been correct about absolutely NOTHING during this crisis, the markets rallied. Chairman Bernanke also said the recession would be over soon.

In my opinion, coming off of such incredibly low levels (1997), the market would have rallied on just about anything positive. Shorts covered which drove the markets higher and tomorrow is another day. Will bank nationalization be "on" again tomorrow?

"Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited." - Ben Bernanke

"We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers." Oh really? Mr. Bernanke is one of the few newbie's at the Fed, the rest are lifers. Given that, how well did the Fed do over the last 5-years Mr. Bernanke? Weren't they supposed to prevent fraud and abusive lending?

Don't get me wrong folks; Mr. Bernanke is a highly intelligent economist. However, his problem is that he's an economist. As I have said many times in the past, the opinions of analysts and economists are as worthless as laminated pizza. They're just never correct.

"Give me a one-handed economist! All my economists say, 'on the one hand on the other.'" - Harry S. Truman

When asked about bank nationalization today in a Senate hearing, Mr. Bernanke called the government's takeover of banks via massive stock purchases and therefore current shareholder liquidation a "public-private partnership."

Oh, well then, that's that huh? How nice; a "public-private partnership." Does anyone else actually hear political SPIN rather than the truth? If the government takes a 40% stake in Shitibank, isn't that quasi-nationalization? Mr. Bernanke would say no because it's not 100% control. Hmm, that's interesting when you stop and recall just what the Fed considers control: owning 25% or more of the stock.

Moreover, when one remembers how much influence a puny 4% stake held by Prince al-Waleed wielded over the board of directors at Shitibank, you would have laugh at the notion that a stake TEN TIMES GREATER by the government would in fact not control the bank. Give me a break.

Nevertheless, the market needed to get off its back and Mr. Bernanke's comment was it.

In other news, our unpaid bills just keep piling up. This just in from The York Times: "The Obama administration intends to provide some $900 million to help rebuild Gaza after the Israeli incursion that ended last month, administration officials said Monday."

Said another way, we're trying to buy friends. Isn't Hamas a terrorist organization and doesn't it control Gaza? Are you na?ve enough to believe that none of this money will be siphoned off to buy military hardware to kill Israelis and Americans (if given the chance)? I didn't realize the campaign slogan "Change you can believe in" referred to arming Islamic terrorists? Oh, and since the US is broke, we will be BORROWING that $1-BILLION (with interest). By the way, this is a gift, not a loan. Yes, sir, that's change alright!

To be clear, I am NOT suggesting the Obama administration wants to arm terrorist Hamas. I am saying it will happen despite his best intentions and attempts to keep it from the radicals in Gaza. Specifically, however, my point is that we should not be giving one damn cent to anyone since we have to borrow it before we can give it away.

Borrowing funds at interest, then giving them away while you're broke, is madness!



Previous Day's Trading Room Results:

Trade Date: 2/24/09

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


1) Pivot sell @ 1:40pm at 768.25 = +1.00, +3.50 & +2.50 (3-lot)

2) Algorithm positions (4)...combined SofT and Algo total...+10.00


Electronic (YM) Mini-Dow:


1) No trades today



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!