I think it would be safe to sit on the sideline at these levels. Congress and the rest of the government is going to do what it takes to save the banks and instill confidence back into the system.
Unlike the administration that is walking out the door in 60 days and don't give a shit - the new administration and congress are banking their jobs on doing everything within the public eye to restore confidence to the markets and save our banking system. The dems will do this simply to have a told you so attitude toward the republicans and maintain a strong control through the next election.
I would suspect the following coming this week:
1. Ban on short-selling or reinstating the uptick rule
2. Additional capital injection at the very least to Citi with extremely favorable terms
3. Obama transition team will disclose their intentions to continue down the path of the original TARP plan and that is to buy bad assets off of the banks - this will create tremendous positivitity for the credit markets.
4. Introduction of a plan that will be directed toward the housing market and putting a floor in on housing prices through favorable re-negotiation of loan terms and introduce a gov't insurance program that will be similar to the fha/va program.
5. See some suspension of the mark to market rules that will extend until the other pieces of the plan are put in place.
All of these activities will shore up the banking system, bank capital needs, housing prices and asset valuations etc.. Yes - it will be expensive, very expensive for the taxpayer - but the alternative, which the market is giving the public and government a taste of is - complete financial failure.
Stay away from the short side because you will lose trying to bet against the unknowns of the federal government.
Citibank will not fail
Wells Fargo will not fail
JP MOrgan will not fail
Morgan Stanley will not fail
US Bank will not fail
Bank of America will not fail
Goldman Sachs will not fail
This has become very clear with the words we have been hearing from the new administration over the last few days. Be carful! Waves can't predict government action.
You grand plan leaves out one thing, "Mr Obama is tmy savior". This will break the US economy. Not short term, but long term. This will put the US system at a severe long term disadvantage.
All you care about is your portfolio, which will mean nothing I might add when they pull an Argentinian special on your ass and seize your (our)retirement and portfolio accts. I'd start buying real estate.
Bailouts are not good news, "saving" the system only saves it temporarily, and Obama's plan to build new roads and bridges will have the same effect FDR's plan had. It will lengthen the pain.
The only solution is the free market, not trading curbs, mortgage renegoitations (why does anyone who signed a contract deserve to be bailed for their stupidity?), and savy accounting practices.
Careful what you wish for you socialist pig.
It might have been a crazy plan that I dreamt up - but you can start checking items off the list that I have put together.
Huge capital injection and backing of bad assets by govt are the first to check off.
Lets see what the Obama conference call brings at noon.
SEC is meeting from 10am to 1pm today. Lets see what comes out of that meeting too!
Call me crazy - but I called the action for Citi!
I can only say this:
All Ponzi schemes collapse eventually. The outcome is devastating for those that are involved.
The US Treasury is a Ponzi scheme (bubble) on the verge of being popped.
You are correct the entire world is involved.
But they have to deconstruct the Ponzi to survive.
That means balancing the budget and cancelling almost $60T in unfunded promises made by greedy, short-sighted politicians supported by us greedy "we the people".
What are the chances of that?
You base hope in the future on being able to keep the Ponzi functioning.
It will cease to function quicker tahn you think.
The warning signs are all over the place.
I don't wish anything bad. I only point out the likely outcomes based on our cuurent path of destruction.
I wish it not to be so, but they are only making it worse.
All debt bubbles pop.
Yes they will keep feeding the debt monster but it will fail under its own weight regardless.
Changes will happen. Fiat currencies will be exterminated and replaced as a way to heal some of the debt burden.
Its time to get right with God.