FED Lies and Stick Saves

What happened today to warrant the ramp in the stock market today? After countless stick save attempts, we finally got a meaningful ramp in the indices today. CNBC was proclaiming this to be the best rally in 6 years. Yes, the pump machinery was in full force today. You would have thought that Maria Bartiromo was going to have an orgasm right on national TV. Cramer is back to his old bullish self proclaiming that "certain" stocks are now buyable. But you can see the Jeckyl and Hyde right through Cramer's eyes. He is a poor confused soul.

The FED announced a $200 billion liquidity injection into the troubled AAA mortgage and other securitized debt. Yet, according to Karl Denninger, a closer look at what the package entailed reveals a lot of smoke and mirrors. You see, the market erroneously interpreted this as a bailout attempt by the FED to inject liquidity into halted credit market. But real money isn't really injected into the credit markets. In fact, a closer examination would reveal that there really ISN'T any new injection of hard capital OR bail out of AAA mortgage backed securities that really isn't AAA. Instead, the deal apparently is directed towards the primary brokers that the FED utilizes to sell the Treasuries. It appears that these broker dealers have gotten over their heads in shorting the very treasuries that they sell to end buyers in excess of 10X their asset value. This is one way that the dealers can earn a profitable carry trade. But, when the market is unstable and many more people flock to treasuries for safety it effectively drives up the prices and effectively "squeezes" the primary dealers. There is a crisis that isn't reported by the main stream media in the primary brokers.

So, FED lets the main stream media pump this event as a fix all for the markets. The DOW surges over 400 points and S&P 500 Index is now once again at 1320, in what was a breath taking rally. But for what? Why hasn't the FED step in a set the record straight. That this was not a bail out of all subprime mortgages but aimed at preventing a disastrous implosion of its primary dealers? When will the markets figure out that we are in deep trouble and that there is continued growth and contamination of all aspects of the credit markets?

I suppose we will rally for a while, but I don't see this going on for more than one week. Eventually, the market will wake up from its stupid stupor and realize that they have once again been lied to- By the FED this time. The various stick saves only prolong the inevitable washout that will come and will make that event even more painful.

Just for clarity, the FED's job is not to stick save the equity markets or save failed banks. It is not their job to act as an agent for fraud that is going on at many of our large financial institutions. Their job is to steward the economy into the right direction by monitoring inflation. Inflation is the killer of all economies and we are now losing that fight. When will our governors and policy makers wake up to the rampant abuses of the greedy financial institutions including the ones that profess to police them and do something?

It is very sad. But do not buy this rally. It is for fools. Do not listen to Cramer because he knows not what he does. Stay in cash or go short.