Fictional Financials and Fantasy Land Insurance

A bit short on time tonite, so this post will be a little brief. Did I ever tell you out there that I hate the winter? Ice storm for tomorrow's commute! That should be tons of fun. At least I get a half day off and Monday off in honor of MLK day. I love work holidays.

Nasty Market Action Today - Lots of Calls for a Bounce
I will not go over all the specifics of today's bear attack. The markets really took a pounding today. The Big Picture wonders whether a bounce is in order, or a prolonged sell off. Karl Denninger of Market Ticker says that a bounce is likely, and a perfect time to dump any holdings (yes, even gold). Todd Harrison at Minyanville also is looking for a bounce. That's more bounces than a cheerleader on a trampoline!

I am not a technical guy, so the "oversold" kind of analysis never really moves me. Tomorrow is expirations Friday, and the FED will now be hard pressed to do nothing with rates tomorrow. A "surprise" 50bps tomorrow could, I repeat could, manufacture the bounce everyone is looking for.

I can only offer my own personal experience at this juncture. The markets have been going steadily down for some time now. The mountains of selling can only be seen as a major restructuring of market exposure by large holders of stocks. With a recession in the works and banking issues getting more precarious, the markets are going to break down severely very soon. When it happens there will be no bounces, no upticks, and no safe haven. I remember vividly when the tech bubble burst and biotech went with it. 6 months straight of down days with maybe 1 or 2 small up days thrown in. It sneaks up on you like the current drop has, and it keeps on going down. Is this it? If I knew that I would not need to work! My guess is the final move down will commence when the FED is out of ammo (probably the end of this month) and the proposed stimulus plans are detailed (and are seen to be ineffective). So my guess is the start of February!

Fictional Financials and Fantasy Land Insurance
I am not a big Jim Cramer fan, but you have to love the guys enthusiasm. He hits the ball out of the park today though with his take on the financials and the bond insurance companies:
http://www.cnbc.com/id/15840232?video=624755222
Cramer calls the financial statements from the banks "fictional" and the AAA ratings still retained by the bond insurers as "criminal". I could not agree more. This is an important juncture right now. So much of the current debt based economy is built on absolutely nothing more than blind faith that things (stocks, homes, etc) all go up forever and so spending all one has is just fine, there will always be more in the well. The veil of bond insurance is going to fall very soon. The silly "book value" of financials will be shown to be pure fiction. The collapse of the mentality of interest rates as a fix for everything will be elucidated.

Check out MBI and ABK today. That is what happens when reality smacks fools in the face and makes them feel stupid. A rebate check of $1000 dollars given to someone $150,000 underwater on a home is an insult to their now slightly elevated intelligence. The fantasy land that is the US consumer may be hit by an earthquake. One can hope, but I always feel that it is just a bit out of reach.

Have a good night.