Tuesday, March 3, 2009

Sell me some protection!

Politicians create policy by trial balloons. So now this administration is fleshing out the "Bad Bank" plan in today's WSJ:

WASHINGTON -- The Obama administration, filling in some of the blanks in its bank bailout, is considering creating multiple investment funds to purchase the bad loans and other distressed assets that lie at the heart of the financial crisis, according to people familiar with the matter.

The Obama team announced its intention to partner with the private sector to buy $500 billion to $1 trillion of distressed assets as part of its revamping of the $700 billion bank bailout last month. It's central to the administration's efforts to unglue credit markets, alongside a Federal Reserve program aimed at spurring consumer lending in areas such as credit cards and home loans that will be officially launched Tuesday.


The silver bullet, for this administration seems to be the TALF. Maybe they think it will stop the market's own Beast of Gevaudan, which is terrorizing shareholders and bulls with it's bloodthirsty ways!

But Geithner was voted down by the Market on February 10, when we closed under 8,000. His bailout of Citi and AIG was voted down again by the market when we closed under 7,000 yesterday. His silver bullet won't work.

The TALF story, and the consequences are here. Now we get the same old story again.

Policy by trial balloons! They pulled the same stuff February 8th!

Why isn't there any demand for these assets? Because the only buyers want protection! Did you miss this part of the story?

To encourage participation, the government would try to minimize risk for private investors, possibly by offering non-recourse loans.

You want lines? You want to go where there is some demand? Just go where they're selling protection. It's not Geithner's silver bullet but it's ammunition!

Why don't they go out to the local gun show and see the lines. Or maybe they should see how long ammunition stays on store shelves. Does Wall Street think that all those purchasers of ammo are using it to go to the local range? I know Mickey Rourke played a good spot in "The Wrestler" but maybe they can also forget about 9 1/2 weeks and realize that these folks aren't getting ammo to seduce the girl. They're getting it for protection.

Or maybe Wall Street should visit the local church or temple on the weekend, and try and get a parking spot. These folks have already been brought to their knees! They're selling protection of a higher power.

Maybe Wall Street doesn't get it, because the VIX hasn't gone through the roof. For some, what's left to protect? For others, who will sell them their protection? AIG? Will Buffett sell some more puts? How about the broker dealers? Now nobody wants to sell these "sexy" forms of protection, because they don't work, and there's nobody left with any capital that's been bullish!

But sex protection is still selling. Condom sales were up 5% in Q4, and up 6% in January. They're selling protection, and except for ex-attorney generals or for Wall Street bankers, most sex is free. But I'm sure some families are worried about the expense of having a kid in the current environment, especially when Mom doesn't have insurance.

I'm sure that they would be even having more sex, but 1/3 of the people can't sleep because they are worried about financial problems. Does anybody think that these folks will be big consumers? Their idea of "aspirational" shopping, is trading up to Kellogg's when they have the two for one sale of cereal, from the store's generic. The only Coach aspirational shopper seems to be their Chairman/CEO Lew Frankfort who picked up 50K shares yesterday at $13.24!

Last week, Bernanke was testifying before Congress, and he said, "We're not completely in the dark." He then said he saw a recovery in the second half of this year, and into 2010.

Heck, only 5 economists out of 52 see GDP falling throughout 2009. Is that why GE trades with a seven handle? Or Alcoa or IP at 5? Because the economy is going to turn? Is that why the banks are all slashing their dividends, cutting credit and not lending? Because the economy is going to turn?

Maybe these 47 bright eyed economists are the ones buying futures every morning!

The best line came from Richard Sylla who said, ""When you're in the expert business, after a while you realize there are no experts."

They're just not completely in the dark.

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