The headline has already stated that the "The Stocks Shall Rise Again". So then, marketwatch.com has already declared that the stocks will rise next week. As if they have some form of power that can see into Monday's future. Perhaps they do. Certainly CNBC has the ability to help "stick save" the market that is acting according to the technical and fundamental economic conditions. It only took Charlie Gasparino to be used as an instrument of rumor mongering to save the market from the abyss.
So this is what has become of the markets. It is controlled by greedy wall street bankers and manipulators who would put Martha Stewart's "wrong doing" to shame by their blatant disregard for laws or ethics in order to pad up their wallets. It is neither rational nor fair but it has been that way since the market's inception. I would highly recommend the readers to read "Wall Street: A History From It's Beginnings To The Fall Of Enron" by Charles R. Geisst. The so called quant funds and computer programmed trades are another word for manipulation but it is accepted on Wall Street as business as usual.
What is immensely interesting is that the "Bail" out news of Ambac and other monoline bond insurers is nothing new and has been ongoing for a while now. But because of the nature in which it was presented on Friday, it gave the impetus for "squeezing" the shorts and paved the way for a monumental manipulation by the quant funds. The news that saved the market or shall we say, the news that manipulated the markets is old news and only gives a faint glimmer of hope to the economy and the stock market that is faltering-FAST! It gave an engineered respite at least for one more day. The main stream media is now calling for bottoms and rallies. Of course all of the credit related problems and recessionary pressures mysteriously disappear in this misguided euphoria.
What no one wants to talk about is how the economy got into this mess in the first place. It is because the smart money decided that it was a good idea to lie to the public and manipulate the credit markets. They created these incredibly complex vehicles of credit default swaps, CDO's, SIV's, and many more alphabetically designated acronyms that stands for one thing: FRAUD.
The irony now is that the whole culture of investment banking and banks in general have shunned government intervention in favor of free markets. But now that their "asses" are in the grinder, they are crying for government bailout. As if their actions that lead to the current dangerous dilemma has somehow blindsided these fine folks. The fact is, in the go go days of easy credit and Easy Al, it was the government, the banks, the stock market, and the world financial institutions that perpetuated the demand for these little known credit vehicles because it was "easy money". They blatantly encouraged easy credit to those that couldn't qualify for a Sears Credit Card. It is this credit demand that expanded the subprime cancer and anyone who could "lie" and is deemed "cerebrally functional" on the credit application was awarded homes, cars, and never ending stream of money thanks to the home ATM's. Many low level workers were instantly transformed into housing investors and just about everyone was goin to be millionaires investing in homes they knew they could not afford. But it was okay because the greedy mortgage brokers colluding with banks kept pushing more and more esoteric and poorly understood home loans with teaser interest rates and other dangerous back ended deals. Thus feeding these sheeples and naive minds the notion that if they didn't buy a home now, they would be left out of the American dream forever. So this went on and now we are finding that these actions threaten our economy in the form of credit collapse. The banks won't and can't lend to each other because they don't trust each other. Fitting.
So what did the monolines have to do with subprime? To make the long story short, there was no regulation of these businesses and those that ran these companies mislead the investors of its own companies by taking on these little known subprime credit vehicles by insuring them. The short end of the story is that they are on the hook for insuring over $500 billion dollars worth of loans that the banks made which are now worthless. Should the monolines go bankrupt (psst...they are already but the rating agencies such as MOODY'S, FITCH, STANDARD AND POOR'S, will not do the right thing by doing their jobs ethically and legally and proclaim them as such. This exposes the long standing conflict of interest that exists between the banks, insurers, and the ratings agencies. They are fed by these very people for their livelihood and they dare not now trigger anything that will lead to continued worsening of credit situation. I just want to know that if AMBAC, MBIA, FGIC, cannot continue operations without outside bailout via capital infusions and maintenance of the AAA ratings so that they can obtain more credit to stay afloat, then how are they even credit worthy? They are not. The whole aspect of monoline bailout by the bankrupt banks such as Citibank (C), UBS (UBS), and other banks that have the most to lose if these monlines fail to get the AAA credit ratings, then these banks and many other banks will have to come clean with more off balance worthless debt onto their balance sheet. The last company that did these end games relating to off balance shenanigans was Enron. We all know what happened to them.
Karl Denninger, a well known blogger who has outlined this issue extensively has been asking the same thing "where are the cops?" and has started a grass roots movement to petition the government to end the corruption and force the banks to mark to market all of their off balance losses so that the economy can move ahead to recovery. Until this happens, we will continue to see our future destroyed by these few greedy bankers, insurers, and financial institutions.
A link to the petition is here and I would whole heartedly encourage anyone reading this blog to sign and spread the word. While you're at the Market Ticker Forums, why not sign up and get involved in the discussions? It's free and it's a whole hell of a lot more educational than CNBC or any other financial sites that won't tell you the truth.
In conclusion, it is sad to see the relentless spin put on by the financial media, the companies involved, and the relative impotence of our regulatory agencies and governmental leaders who continue to look the other way. Since Ben Bernanke's famous speech last year in February when he declared that the "effects of the subprime loans are largely contained", how exactly has our economy and for that matter for the rest of the world fared? So as you rush ahead to believe that all is well and that a "bail out" is in the offing, please understand this, it is worse than you think and that our government is incapable of telling the truth or it is incapable of grasping the concept that a deteriorating credit condition and loss of credit liquidity is what lead to the last deflationary collapse of the economy. Think 1929.
We are indeed in a economic quagmire and those that lead you to think that the economy will rebound, or the recession will be mild (now more people are talking about it), DO NOT BELIEVE THEM!
By the way, here are the charts of S&P 500, does that look good to you? The manipulation on Friday managed to stick save this index.
click the image to view larger and clearer image.
Have a good weekend.
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