I’m almost embarrassed to admit that I spent most of my day glued to cnbc… not that I was looking for investment advice or anything, but I really wanted to see how Paulson, Bernanke, and Cox pitched their bailout plan to the Senate committee, and I wanted to see if any of the senators in the committee asked any of the questions that I would have - actually only one question really, namely:
“Why, if you guys are the ones who allowed this to happen in the first place, telling us the entire way down that everything was fine, the economic system was strong, take a long term outlook, etc, should we have enough trust in you to fork over 700 billion - that’s right - BILLION - dollars, on your word that it will now fix what you told us all along wasn’t broken? And if it doesn’t work, aren’t we at the same place we are at right now, minus nearly a trillion dollars?!?!
Oh and by the way, Hank, how much do you stand to lose if your old firm, Goldman Sachs goes under, and how does that play out in your scenario about forking over this money to you ASAP without investigating the situation?
Oh and one more thing - why is it, that the hard working, tax paying members of my district, many of whom just saw their net worth cut by substantial amounts listening to the likes of you clowns, and the clowns on CNBC telling them to buy & hold, that the economy was still sound, have to bail your old buddies out of their bad investments? Has Goldman, or Merrill, or any other broker, bank, or fund ever bailed them out of a bad investment? Doesn’t it specifically say, right from the terms of use on Goldman’s website that:
“No determination of suitability has been made; not all risks are disclosed; private advisors should be consulted: The fact that GS has made the data and services provided on this Web site available to you constitutes neither a recommendation that you enter into a particular transaction nor a representation that any product described on this Web site is suitable or appropriate for you. Many of the products described on this Web site involve significant risks, and you should not enter into any transactions unless you have fully understood all such risks and has independently determined that such transactions are appropriate for you. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or complete discussion of the risks which are mentioned. You should neither construe any of the material contained herein as business, financial, investment, hedging, trading, legal, regulatory, tax, or accounting advice nor make this service the primary basis for any investment decisions made by or on behalf of you, your accountants, or your managed or fiduciary accounts, and you may want to consult your business advisor, attorney, and tax and accounting advisors concerning any contemplated transactions.
No liability for content; no liability arising from use: Goldman Sachs shall have no liability, contingent or otherwise, to the user or to third parties, or any responsibility whatsoever, for the failure of any connection or communication service to provide or maintain user's access to this service, or for any interruption or disruption of such access or any erroneous communication between Goldman Sachs and user, regardless of whether the connection or communication service is provided by Goldman Sachs or a third-party service provider. Goldman Sachs shall have no liability, contingent or otherwise, to the user or to third parties, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance, continued availability, completeness or delays, omissions or interruptions in the delivery of the data and services available herein or for any other aspect of the performance of this service or for any failure or delay in the execution of any transactions through this service. In no event will Goldman Sachs be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using the data or services made available herein, even if Goldman Sachs has been advised of the possibility of such damages. Goldman Sachs will have no responsibility to inform the user of any difficulties experienced by Goldman Sachs or third parties with respect to the use of the services or to take any action in connection therewith.”
Doesn’t that pretty well state that “Hey, you’re on your own here pal, and if you screw up, we’re not going to take any responsibility whatsoever to bail you out, so do your homework before investing your money.”? So Hank, why is it that if they make it abundantly clear that while they made billions of dollars on the backs of the hardworking members of my district but clearly state that they will not back up their bad investments, why is it that the taxpaying members of my district should be liable to bail them out?”
Now that’s what I would have asked, and while there were a few questions that did touch on those subjects, most were sidestepped with the kind of stuttering genius one would expect from ole Hank. Not once did we really get a clear answer from anyone on anything, except the fact that we were all in really big trouble and we needed to approve this little loan yesterday or we’re all going down fast. And sadly, most of the senators there have little to no idea as to how the markets really work, and therefore weren’t really in a position in the debate to call these guys out on anything.
Meanwhile, the markets were holding up surprisingly well throughout most of it. At it’s high, the Dow was up over 100 points, and the NASDAQ was up about 20 points at the days high.
But by the last hour of trading the heavy selling started again. Although the volume has been very light over the past two days, the fact that many investors are simply sitting o the sidelines until this whole thing plays out, especially with the newly imposed ban on short selling (discussed in this weekends market outlook). All market averages dropped better than a percent on the day when it was all said & done, not a single one of them with any viable support before last weeks lows.
Now this looks like quite a bearish situation to me, and our bearish outlook on this market has served us well, I seriously doubt you’ll find many out there posting the kind of gains that we have of late in this market, and looking at our portfolio versus the market overall for the year it’s pretty clear that buy & hold is no longer a viable option.
That said logic has certainly been sparse to non existent as of recent months, so a big move to the upside cannot be ruled out here. As such we are going to add one new long to the mix to keep the portfolio a little more hedged while remaining light and with a bias to the short side. The commodity rally didn’t follow through into today, but we are still looking at many oil, gold, and silver (congrats to stock market chat room member art for a great trade on SIL today, while I’m on the topic of silver) to provide good trades to the upside at some point in the next few days, possibly after a bit more consolidation. All were overbought coming in, and some profit taking is a fairly healthy thing as we see it. There are a number of nice setups both long & short listed in the watch lists above for potential intraday trades tomorrow, but remember to keep a close eye on things, the reversals can be fast and unforgiving if you are complacent. That said there are plenty of great opportunities out there, and we’ll keep doing our best to find them for you. Have a great evening, happy trading!
Quote of the Day
"I'm not concerned about all hell breaking loose, but that a PART of hell will break loose... it'll be much harder to detect."
George Carlin (1937 - 2008)
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