Well if you did not see today's mega rally coming, you just have not been paying attention! The markets recouped almost the entire temper tantrum induced losses from Monday's session. Renewed hope for a handout, bailout, gift or whatever you want to call it (some are now calling it a "rescue" plan) was seen as the catalyst. The strong belief that congress will fold and indeed flush over a trillion dollars of taxpayer money down the drain is so ingrained that Wall Street simply cannot function under any other circumstances. Crazy times.
It is a Bailout, A Turd by Any Other Name Will Smell Just as Bad
"You can't polish a turd." -Will Darnell from the novel "Christine" by Stephen King
a rescue, especially a financial rescue
example: 1. The government bailout of that corporation is going to cost the taxpayers a hundred million dollars.
example: 2. a backup supply of air in scuba diving
Are we clear? Any plan that hands insolvent banks can be called many things, but it IS a bailout. Trying to play with wording to make things sound different is a waste of time. Besides, that ship has sailed and everyone thinks of this thing as a bailout so trying to change that is wasteful.
Nobody Knows What Nobody Knows
The mainstream media was out in full force today, joined by the financial shows and the usual talking heads trying to plead for a bailout bill. The new angle of attack is to try and make the current credit issues relate to an average person. Just in the last hour I have heard on the nightly news and CNBC that if a bailout is not done, and soon, all of the following may happen:
1. You will lose your job
2. You will have no credit card use
3. You will not be able to get a car loan
4. You will not be able to go to college
5. Your kids will all be drug addicts (kidding)
I saw at least 4 different "small business" owners trotted out tonight to tell us all how they will not be able to make payroll unless the credit crunch eases. We can debate the merits of any business that pays employees with borrowed money, but it is clear that Wall Street has called in some favors to get a more sympathetic spin on the current debacle.
So where are we? It seems that a new bill (same as the old bill) is going to come back up for a vote later in the week, maybe after the Senate rubber stamps it first. If this bill does not pass, we are told, a total epic collapse will ensue.
So far the "abyss" has been vague. Something about no loans for bad credit risks or loans that are priced higher for risk. Wow, that is just crazy! See last nights post for more on the "Cheap Money Conundrum".
All over the world governments are scrambling. Ireland nationalized their entire banking system today and guaranteed more debt than their total GNP. I guess we are moving a bit slower here.
I am of the opinion that the whole "banks won't lend to other banks" line is old. If banks will not lend to another one, there may be good reasons. They might know the banks are in bad shape. They may be waiting for free government money to lend. They may be scared. I do not know. It seems nobody knows.
If the markets can rally on the hope of a bill, why not just keep that hope alive? Remember every quarter of banking write downs was "the kitchen sink" and the end of it? Maybe we can give Wall Street the same treatment. Keep trotting out bills that fail but keep promising a new one is going to pass. This way they will move on! Problem solved.
Sadly, I am about 98% sure that the old bill, I mean the new bill, is going to pass. Just too many wimps in congress to do what is right. After passage I will try and coordinate a list of contested seats for any "Yes" vote caster and I will be donating money to the challenger. I urge all the readers to do the same. You may be surprised how little money can swing votes in the smaller house districts, it can make a difference.
Any congress member that votes "Yes" to the bailout bill must be removed from office. It is worth your time and your money. Only after a real credible threat of voter action is established will our elected officials do what we want. The promise of active opposition to any "Yes" caster will be the voter's equivalent of Paulson's "Bazooka" analogy: Cross the voters and we will use it!
Have a good night.