Tentative TARP?

Last week, President Bush was urging Congressmen to at least act like they were not in a panic, but he failed and the bank runs intensified.

Today, the news media is telling us that a deal has been struck. But if a there really is a deal, why is the word “hope” still being used. From the AP:

“But officials in both parties were hopeful for a House vote Monday…”

It sounds to me like there is no deal yet and the president has finally persuaded Congressmen to stop acting like fools.

I am thinking about taking a short position in the futures if they open on a large gap up at 6pm. I have also withdrawn the maximum amount of cash from my bank’s ATM machine yesterday, and will do the same today.

60 Responses to “Tentative TARP?”

  1. Dressguard says:

    Matt,

    good strategy. The motto didn’t change: sell into strength!!! :-)

  2. Dblwyo says:

    Logical fair point and on the same grounds I was expecting a bad day Fri because of the Great Unraveling. We were surprised and it seems to me that we have the bias of too much information and knowledge, at least of a sort. In other words I think the markets will take hope as they took the continuing discussions on Fri and the week before when our lovely incipient crash turned into a major turn-around on the rumor.

    Not sure we can let logic, facts and data stand in the way of impressions and emotions.

  3. K says:

    i am thinking of robbing my own bank account. :P

  4. David says:

    I will fade any decent SPY gap with puts. It will be time for a pullback at the very least most likely.

  5. George Nubert says:

    What’s next storing bottled water, canned food and ammo? I am one of the most bearish people I know and even I am not at the point of going to the ATM.

    I believe that the moment you are preparing for, if it comes to pass, will come with little warning when the markets are seemingly calm but stressed.

    The bailout package will be passed tomorrow or the next day and it will provide a chance to further secure your cash assets.

    As for me I pulled out of the market last October and await the real opportunities. The only thing to do now is preserve capital and safeguard cash so you can walk through the debris of the deep recession and pick up some good values.

    Playing with the market is foolish. Dig the foxhole deeper and prepare some more sandbags in the lull that will be upon us when the bill passes.

  6. admin says:

    George Nubert,

    Let me get this straight. You are advocating “let the whole system freaking burn” and you don’t have any “bottled water, canned food and ammo?”

    Not only are you a shithead, but you are a stupid shithead. What kind of fool advocates ending civilization and doesn’t even own a gun?

  7. K says:

    George Nubert,
    WOW you should have your own CNBC show. Seems like you predicted that the market had peaked last october. Did you get out of the market on the day that the peak was reached? You’re my fukin Idol! How can I be like you?

  8. K says:

    also you are right noone should play with up 400pts and down 400 pts days because no money can be made!

  9. Dressguard says:

    Matt,

    you are in a very good mood these days!!! LMFAO :-)

  10. K says:

    he got every reason to be! haha
    more people spamming the board, the economy is GREAT! what else can he ask for? ;)

  11. David says:

    Yes George, I find my 200% return that I have now YTD utterly foolish and the fact that if I had not made so many mistakes, it should have been more like 500%.

    Yes, I should have been 100% cash this entire time since January and not shorting and going long during the bear rallies.

    And you are correct, bear markets never give us opportunities of a lifetime to make money as it goes down.

    I am a moron for even playing this market.

  12. Pooch says:

    Crash says buy the rumor sell the news.

  13. K says:

    yes pooch that is how it works :)

  14. K says:

    on intrade the bailout happening before sep 30 fell to 60%.
    http://data.intrade.com/graphing/temp/chart1217595790701869271.png

    hehehe

  15. eli says:

    I’m always amazed at the utter ego portrayed on blogs and trading sites of those that post their “trades and actions” after the fact re George getting out at the peak. Show us your brokerage statements and then I’ll lable you a genious.

    Matt, ya scaring me a little on the ATM action, although I do see any bailout as temporary and giving in to a full blown recession (or worse). I plan to sell my few remaining equity based assets to cash at any bounce this week as well as move money from my brokerage money market to a FDIC account, for though it is insured by SIPC, if it’s not govt backed, it isn’t backed, in my view

  16. Paul K says:

    the bailout will get done. maybe take a day or two longer than hoped for but non of our politicians have the courage to draft a bill worth the taxpayers money (http://krugman.blogs.nytimes.com/2008/09/28/the-good-the-bad-and-the-ugly/)

    so the market will get a pop, and then what?
    Economy is still tanking with no fundamental turnaround in sight.
    foreclosures will continue thru 2010.
    companies will scale back investment,
    unemployment will continue to rise.
    consumers will hunker down.
    and we’re still fighting two, possibly three wars.
    fed will keep throwing money into the pit.

    only the dumbest of retail investors would consider buying into this mess.

  17. K says:

    the stats on intrade fell down 20% to 43.5% chance of it happening before sept 30. hmmmm

  18. K says:

    I still want to buy at the pop tomorrow or tuesday.
    SKF that is. in hopes that the short selling ban gets lifted.

  19. Paul K says:

    # K Says:
    September 28th, 2008 at 4:48 pm

    I still want to buy at the pop tomorrow or tuesday.
    SKF that is. in hopes that the short selling ban gets lifted.

    =====
    i don’t think we’re going to see lifting of the short selling ban anytime soon.

    and with the bailout bill as written, it seems we’re entering the make believe bank accounting era.

    http://calculatedrisk.blogspot.com/2008/09/draft-emergency-economic-stabilization.html

  20. admin says:

    eli,

    This is from the latest AP story:

    “As late as Sunday afternoon, Republicans regarded the deal as “a proposal that is promising in principle, but that is still not final,” said Antonia Ferrier, a spokeswoman for Missouri Rep. Roy Blunt, the top House GOP negotiator.”

    I don’t think that there is a deal yet, and Congress is just doing what President Bush wanted them to do: put on happy faces and pretend like everything is OK to minimize the panic.

    If you watch the video that George posted with the Congresswoman from Ohio, you get an impression of what “voters” are intending. The “voters” are telling me that they think they can exist without a banking system and are intent on burning it down. Perhaps it is an idle threat. All I am saying is: don’t be surprised if they actually do what they are threatening to do.

    Matt

  21. Paul K says:

    maybe the ‘voters’ just want a credible banking system and not the casino we now have.

  22. Paul K says:

    16 SEC. 128. ACCELERATION OF EFFECTIVE DATE.
    17 Section 203 of the Financial Services Regulatory Re
    18 lief Act of 2006 (12 U.S.C. 461 note) is amended by strik
    19 ing ‘‘October 1, 2011’’ and inserting ‘‘October 1, 2008’’.

    Financial Services Regulatory Relief Act of 2006 – Section 203.

    “Interest on Reserves and Reserve Ratios

    “Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011.”

    A 0% reserve requirement for banks as of this Wednesday?
    This is trully an amazing development.
    Wasn’t too much liquidity the cause of this mess?

  23. after says:

    well it can’t hurt to be in a bit of mini-y2k prep mode, stocking up on a few things…good thing i like canned sardines !

  24. Paul F says:

    George Nubert,

    You say that you agree with Nouriel Roubini’s need for government intervention, so I would think that you understand the ramifications of doing nothing, yet you also said, “let the whole system freaking burn.”

    You are so bearish, yet you think that there will be “real opportunities” in the future. Do you foresee any opportunities without government intervention?

    You mock Matt’s statement that he took out money at an ATM an also imply that those buying water, canned foods, ammo are fools – but yet you took all your money out of the market. I am curious as to where (what form) your money is, concerning that you feel that you have nothing to lose from a “let it burn” environment?

  25. Paul K says:

    The exercise price “for any warrant issued pursuant to this subsection shall be set by the Secretary, in the interest of the taxpayers.”

    yeh right.

    “AGGREGATION OF PURCHASE PRICES – The amount of troubled assets purchased by the Secretary outstanding at any one time shall be determined for purposes of the [$700 billion] limitation . . . by aggregating the purchase prices of all troubled assets held.”

    So it’s a rolling 700B.

    The is on par with the planning/execution of the Iraq War and Katrina ‘recovery’.
    Smart money has got to run from the US.

  26. Paul F says:

    Paul K,

    If the FED starts paying interest and allows a lower reserve requirement, then the US is really screwed for the long term.

  27. Paul K says:

    ‘the Secretary shall determine whether the public disclosure required for such financial institutions with respect to off-balance sheet transactions, derivatives instruments, contingent liabilities, and similar sources of potential exposure is adequate to provide to the public sufficient information as to the true financial position of the institutions.’

    This is reassuring.

  28. Paul F says:

    Paul K,

    On warrants: I had aslo noticed that section, but I am optimistically hoping that the oversight boards will keep Paulson honest. If Congress publicly calls for all of this oversight and taxpayer protection, and then chooses to ignore their repsonsibilty, then this could hurt them as well, although it along the typical lines of the blame/problems get pushed foreward.

  29. Paul K says:

    # Paul F Says:
    September 28th, 2008 at 5:39 pm

    Paul K,

    If the FED starts paying interest and allows a lower reserve requirement, then the US is really screwed for the long term.
    ====

    they are proposing ZERO reserve requirement.

  30. Paul K says:

    Paul F Says:
    September 28th, 2008 at 5:42 pm

    Paul K,

    On warrants: I had aslo noticed that section, but I am optimistically hoping that the oversight boards will keep Paulson honest.

    ===

    you jest:

    (b) MEMBERSHIP.—The Financial Stability Oversight Board shall be comprised of—
    (1) the Chairman of the Board of Governors of
    the Federal Reserve System;
    (2) the Secretary;
    (3) the Director of the Federal Home Finance Agency;
    (4) the chairman of the Securities and Exchange Commission; and
    (5) the Secretary of Housing and Urban Development.
    (c) CHAIRPERSON.—The chairperson of the Financial
    Stability Oversight Board shall be elected by the members of the Board from among the members.

    ==

  31. admin says:

    The S&P futures opened with a tiny gap-up and are now falling. So, I didn’t get a big gap to fade because nobody is buying the “news” that the deal is all but done.

  32. Yerk says:

    Paul K,

    “Smart money has got to run from the US.”

    I think this has been achieved with the WaMu deal – just unbelievable if you are working under the assumption of making investment decisions in a developed, first-world environment with a sound legal framework.

  33. Paul K says:

    maybe people are buying the news that the deal is done, but are now giving some thought to 1) how flawed the deal is, and 2) what difference it will make.

  34. Paul K says:

    # Yerk Says:
    September 28th, 2008 at 6:10 pm

    Paul K,

    “Smart money has got to run from the US.”

    I think this has been achieved with the WaMu deal – just unbelievable if you are working under the assumption of making investment decisions in a developed, first-world environment with a sound legal framework.
    ===

    perhaps, but if any were still in disbelief there’s this for consideration:

    SEC. 132. SUSPENSION OF MARK-TO-MARKET ACCOUNTING. (a) AUTHORITY. – The Securities and Exchange Commission shall have the authority under securities laws (as such term is defined under section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to suspend, by rule, regulation, or oder, the application of Statement Number 157 of the Financial Accounting Standards Board for any issuer (as such term is defined in section 3(a)(8) of such Act) or with respect to any class or category of transaction if the Commission determines that is necessary or appropriate in the public interest and is consistent with the protection of investors.

    this is simply WTF. and so much for transparent, regulated markets.
    these bozos are just giving the russians and chinese and others more reason to question the assumed supremacy of the us financial markets.

  35. after says:

    gold seems to have skidded – down 7.40 per 321gold.com

  36. George says:

    I watched CNN this afternoon, a station I never watch. I wanted to catch the press conference about the bailout.

    There was one commentator guy, I didn’t get his name, that said, and I paraphrase, “…the media has given the perception that this package is a Wall Street bailout…this package is not about what it will do for Wall Street or Main Street, but what it prevents from happening to main street”.

    If you saw that commentary, you may have a better quote.

  37. Paul F says:

    Paul K,

    I couldn’t find the section that says people are required to buys stocks at prices set the FED and SEC, but I assume I just missed it somewhere.

  38. Pooch says:

    All futures are rallying up,Asian,US,Australia

  39. admin says:

    George,

    Yes, I am perplexed about why people are calling this a “Wall Street Bailout.” What exactly is there left on Wall Street to bailout? The place seems to be a smoking crater as far as I can tell. I want our legislators to do something sensible quickly to save Main Street.

    But maybe I am wrong about that. I’m pretty sure that there aren’t enough “Wall Street Fat Cats” in this country to have signed all of those bad mortgages. In fact, I’ll bet if you examine those bad mortgages, you will find that most of the applicants were “voters”.

    Matt

  40. Yerk says:

    Paul K, that is going the Japanese way of muddling through in intransparency. But this time relying on external funding. Who is going to invest in intransparent markets and what premiums will apply?

  41. George says:

    But Matt;

    The voters don’t know right from wrong: They didn’t know they couldn’t pay the mortgage on a $1,000,000 home making minimum wage.

    As Flip Wilson used to say, “the Devil made me do it…” (I had no control over the situation).

  42. Paul F says:

    C’mon, Matt, I know you are smarter than that.

    This plan helps Main Street (in the short term), no doubt abouts it. But it helps Wall Street more. Wall Street has a smoking crater, but as Tech investors in 2000 found out, the only time stocks can’t go lower, is when they are at 0.

  43. George says:

    Another Slippery Slope?

    I hope another “slippery slope” isn’t being created by the Fed. It’s one thing to demand executives to not get golden parachutes with bailout moneys, but it shouldn’t go beyond that.

    I think it’s great that Bill Gates is a billioinaire. Great that Warren Buffett is a billionaire. Great that CEOs of great companies are millionaires. They earned it and deserve it. They spread their wealth throughout society. Had they not been successful, a lot of others would have not been benefited or been successful.

    The board of directors of companies determine what a CEO gets. That’s their job. They are the oversight.

    This “fat cat” description reminds me of Gore saying the “fat cats” who make $100,000 or more need to pay more taxes. I have news for him: those “fat cats” worked their asses off and paid their dues to get where they’re at, and while we’re at it, they’re paying for YOUR “golden parachute”, buster. This is a sure-fire mentality to take away our incentive to prosper in a free market society.

    It’s a known fact that the top 10% of the income bracket pays over 80% of the taxes already!

    Sure, there are bad “fat cats”: There are “bad cops”, too. That’s the way it is within a free society. That shouldn’t take away the justification to reward the good ones that deserve it.

    Taking away our ability to prosper to the fullest and highest levels would be a loss of a huge chunk of freedom!

    Don’t get me started…

  44. Dressguard says:

    So far today was really disappointing. We will have the biggest bailout in the history of mankind and all we get are measly 0.2% in the S&P futures? Maybe my display is broken somehow. Hard to believe. The best thing today were Matt’s postings and commentaries, e.g. “Not only are you a shithead, but you are a stupid shithead.” That’s what I call straight talk. LOL
    :-)

  45. Dressguard says:

    We turned slightly reddish in the S&P futures now. If a short selling ban and the biggest bailout in history can’t prop up the markets, what can? I think Matt was doing right withdrawing money from the ATM. Actually, I was withdrawing some weeks ago one third of my bank account. It’s now under my mattress. Just in case. ;-)

  46. K says:

    and i would like to make a point again. ! will go rob my own account! see me in the news guys! haha

  47. jcmri says:

    Dressguard,

    Just wait till the FED recalls all mattresses! ;)

  48. K says:

    i might just be blind sighted by intrade.com lol but this bailous happening before sep 30 fell to 30%. it was around 92% early in the day.
    Yes it will get done. but they said they wanted it out by the opening of the asian markets monday. haha

  49. K says:

    look at some bloomberg articles

    Fortis Gets $16.3 Billion Bailout by Three Governments; to Sell ABN Stake

    Bush, Congressional Leaders Agree on Bank Rescue Plan; Vote Due This Week

    `Fragile’ U.S. Economy Faces More Turmoil Even After Rescue, Paulson Says

    Bradford & Bingley Set for Takeover or Nationalization by U.K.

    AWESOME the “Bailout” or the now called Bank Rescue Plan is overshadowed by all these other news. Yea and we expected a bounce :P

  50. Paul F says:

    K,

    Intrade must be wrong.

    Haven’t you heard? The President, Sec of Treasury, Fed Chairman, Senate Democrats, Senate Republicans, and House Democrats have all said that they reached an agreement on the big issues. That’s everybody, right? Right???

    Intrade’s $0.30 price must just be the firesale price, not the real price.

  51. K says:

    might be it keeps bouncing 30-60 haha i could make some money had i signed up and deposited some.

    seems to me like gold is falling big time. oh well :P

  52. K says:

    Pelosi: Rescue is not a bailout but a `buy-in’ hahahahahahaha

  53. Dblwyo says:

    Y’all might/ought to watch Sen. Gregg’s news conference. The simplest most straightforward discussion without the hyperbole and political posturing of any of them:
    rtsp://video1.c-span.org/project/economy/econ092808_gregg.rm

  54. towelie says:

    Serious question: why take your money out of the bank? If you thought your particular bank would be going away but the system survives, I can see the logic. But if you think there’s a chance the entire system could disappear, what good is some pieces of paper marked “Federal Reserve Note” going to get you? If the banking sector goes the way of the dodo, would we not degenerate to a bartering economy? It seems that food, shelter, and even weapons would come before gold/silver/jewels (let alone paper currency) in that type of society.

    I am very bearish, but the Mad Max scenario still seems far fetched.

  55. Pooch says:

    Futures are diving

  56. Average guy says:

    really enjoying “Atlas Shrugged”
    thnx 4 the recommendation

  57. eli says:

    If anyone wants a trade on the DOW today, the 1 minute chart is forming a triangle since 1:30. A break either way may be a trade.