Life Support for Bankers

All the efforts of EU folks has certainly been filled with drama. Germany and France taking the lead which historically, politically, and financially has usually led to disaster in some form or another. But they slew the banker dragon by making him take a 50% hit, knowing that if the agreements fall apart, a starting point of 50% will easily become 80% . CDS fears have subsided but by the nature of the 50% deal sort of make that market unstable anyway. Why buy insurance if there is none?

Interventions can be a pump job, time out strategies in a political cycle. In the end the financial risks may be much greater than the political interests they are protecting. All these bail out measures are put on the spot and, as much as the Fed would not like to believe, there is an end game where no amount of cash held in reserve at banks can protect against the loss of confidence resulting in failed efforts. Economic expansion depends on the belief that there is a real upside, not just some sort of endless life support for bankers.

The Grand Speculation

Speculation usually leads to prices which markets will ultimately reject. We saw this with Tech Spec in 2000, Stock Spec every generation, Real Estate Spec, well, you know. Now we are seeing Intervention Spec, where governments around the world are supporting prices from fixed income, to stocks and commodities. The US Treasury and Federal Reserve are now in the mother of all strategies which is basically speculating on asset inflation as the only acceptable means to keep world economies from entering into a deflationary spiral. This of course would be bad for everyone it is reasoned and especially those at the Fed and Treasury who do not want to be lumped into history as the type of 'know it alls' who did not learn from the 'last know it alls', who let bad things happen.

And of coarse there is the lesson. Why fix something that is broken? Bad is bad and good is good. We should be able to live our lives without anything bad happening to us. No bad debts, no bad stocks, and most importantly, no bad life. Now this is especially applies to the richest of the world where all the energies and labors of the greater population are required to pay for the no bad life guarantees.

It definitely seems to working. Except for real estate, where it is hard to save people in trouble not viewed as material to saving the wealthy, stock prices have gone to the edge of bad several times of late and miraculously recovered each time. Now this is especially hard on rational thought let alone perennial market Bears. This economic crisis was their chance to gain on a whopper of a financial disaster. Instead they are repeatedly run over like road kill. Only Evangelical Bulls from cable business news are happy viewing each dunk in the markets as a cleansing of the unholy non believers of the markets true spiritual direction, up.

If we all get behind the limo and push it the hill there is no way all this intervention can fail. Somewhere along the line the gears of best economic practices will mesh with the broken parts and we shall have good. No jobs, but good.

Wall Street

From The New Yorker

Occupying Wall Street in 1967

Another Bottom Indicator?

Associated Press

30-year mortgage below 4 pct. for first time ever

By DEREK KRAVITZ

WASHINGTON -- The average rate on the 30-year fixed mortgage this week fell below 4 percent for the first time ever, to 3.94 percent...... (Entire Article)

Bears Fall Up

With reversal of the market on Tuesday, bears have been trying to find anyplace to hide as shorts are all chasing the same offer. Friday's unemployment number will provide some hope for the red side but the numbers will have to be extremely disappointing. Price configs are still bad but intervention policies are constructing world where pessimism about value is met with sand bags filled with liquidity. But as we have seen over the last months, do not get too comfortable with your position.