Just a few quick hits tonight. Remember to leave Friday night entertainment ideas in the comments section. Film clips, books, music, or pictures (PG rated at most!) are all open for suggestion.
Sinister Side to the Bailout Hysteria
It has been well documented by Mish and Market Ticker (who has a great video up tonight; it is a must see) that the darkside to this money grab may have more to do with foreign creditors than is being spoken about. China, Japan, Saudi Arabia and many others were duped into buying tons of the mortgage backed AAA rated toxic paper, and they are not amused. Faced with enormous dollar holdings that have been cut about 30% in value over the past few years, looking at diminished stock returns, and now saddled with worthless paper the foreign powers seem to have had enough.
The strong language that allows foreign trash to come back to the treasury was such a sticking point to any plan that a veto was threatened if this provision was taken out. This is sinister stuff. The US, being the pillar of strength that it is, depends totally on massive inflows of capital to fund day to day operations. The providers of this cash may have just said the price for continued support would be to take back all this worthless stuff or else. This explains the mad dash to get a bill done as well as the absolute refusal by any official anywhere to really tell the public what the "abyss" is. As Americans, our instinct would be to tell the foreign countries to get stuffed. Unfortunately, we are in no position to really do that. I wonder if the powers that be realise that the foreign countries are in no position to do anything either. Call it the beauty of Mutually Assured Destruction, only in a financial sense. Fun, huh?
Mother of All Bailouts II?
Let us take an inventory of all the tricks the FED/Treasury have employed to halt a downdraft in the markets:
-Ban Short Selling; Check
-Loan money by the Billions through alphabet programs; Check
-Guarantee Money Markets; Check
-On the cusp of passing a revolving bailout bill to the tune of 1 trillion plus; Check
-Coordinated cash injections all over the banking world; Check
Yet the markets are still screwed! What can one do in this case? If you are the USA you start laying the groundwork for the next bailout bill of course! You couldn't guess?
Headlines are already morphing from "passage of rescue bill will save markets" to "rescue plan may not go far enough". CNBC was chief of staff today as they were setting the stage for the Mother of All Bailouts II. All the talk centers on how the government will have to go even farther than the current bill to "calm the markets". Why can't the markets take a Valium like the rest of us?
I imagine somewhere by the end of next week a new "stimulus" package will be in the works along with some other plan to free up more money for the markets. At what point will someone, anyone come to grips with the fact that we are going to have some pain. Stay tuned for the next money trap which should be unveiled late next week.
Have a good night.