Tuesday, March 11, 2008

David slays Goliath

As of February 27th, primary dealers held the following positions: $139.7 billion of agency securities $60.2 billion of mortgage-backed securities

I mention these, because the Fed said today that it would lend up to $200 billion of Treasuries in exchange for the above, which means that the Fed’s facility literally is able to handle all of the agency securities and mortgage-backed securities that dealers hold.

Before the bears try and crucify Bernanke for providing liquidity to the bulls, the bears should remember that when David slayed Goliath, he brought his head back to Jerusalem from the Valley of Elah. What happened to the skull? It found it's place under the cross on the hills of Golgatha.

The Fed's TSLF (term securities lending facility) stopped the housing bears and the distressed mortgage sellers in their tracks. Now Bernanke, the much aligned academic, is dragging the shorts to their crucifiction. They're still partying with Judas and don't even realize they are carrying their own cross!

When you hope to profits on people's misery, and the plummeting value of workers 401K's and homes, while you self righteously laud your intellect, it eventually exacts a price. Maybe they should watch The Valley of Elah. Eventually, people want normalcy in their lives, and they want it faster and quicker than what circumstances seem to allow. But when you find the bones, you get closure.

In the market, we've already found the bodies, but the bears want them to be bones, picked over by the vultures. But today the Fed has said enough. Now the bears are going to have to play by different rules. And that's their beef. They thought they had time. Now they don't. The bulls want the markets to be better now. And they bought today.

So we'll lose some of the invincibles this week. Like Governor Spitzer, the shorts and bears are being prepared to be "steamrolled." Isn't it ironic that the words they use, is what will happen to them?

It couldn't happen to a nicer bunch!