Aid to the Disabled

According to MarketWatch,

U.S. stocks erased half their earlier losses on Thursday, after Standard & Poor's suggested (see "S&P Says End in Sight for Writedowns on Subprime Debt") the bulk of write-downs linked to bad home loans may be behind for banks. The statement helped to partially offset concerns about the potential collapse of a fund owned by Carlyle Group and another weak report on retail sales.

"It just seemed like it was getting a bit overdone to the downside," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "But the negative feeling remains in place and the concerns over Carlyle and financials are still in place."

As far as I know, S&P (and its peers) never saw any of the bad news coming, so how is it that they are now able to see the light at the end of the tunnel? That's aside from the fact, of course, that the various rating agencies have already confirmed their grotesque incompetence (or, perhaps, their blatant disregard for the law) by maintaining AAA ratings on companies and securities that clearly don't deserve them (see "Moody's, S&P Defer Cuts on AAA Subprime, Hiding Loss").

I suppose this is simply further evidence that the IQ of most equity traders would easily qualify them for long-term disability assistance.

On a positive note, it's good news for the realists - er, I mean bears. They've been given a great opportunity to sell overpriced equities at higher prices.

Comments

[Boris]

Hi, I just have a real hard time understanding Wall Street. I am short on some tech companies- I have done well with those but when I see the stocks rally- I just dont understand why people continue to pump money into some of these overpriced tech companies.. As I look at my screen and see green, I ask myself why are these people buying these stocks??? I just sell my options and rebuy once they get higher, over and over again

[Shankar Khadye]

As they say, markets climb the wall of worry and fall the (slippery) slope of hope.

The level of delusion in this market is mind-boggling.

I must congratulate you. I have bought long-term puts and just sitting on them. And every time the market goes up, I buy short/medium-term puts and take profits when it goes down.

In fact, the situation is so ludicrous that you can hold both - calls and puts and make money both ways!!!

Its really amazing experts coming on CNBC and stating how they want to buy because the recession will be short and shallow.

Its really sad seeing all these people thinking that the Government (or the Fed) is going to bail them out. Unfortunately, I don't think the Government isn't going to. You know why? Its going to be very very busy saving itself!

As Churchill once said - "Americans can always be counted on doing the right thing. Especially after they have tried everything else."

[Jes]

The San Diego newspaper yesterday had a front page article assuring readers that there's no recession. I think what's really going on is that there's been a behind-closed-doors decision somewhere to try to quell the rising panic.
It might be a better strategy to instead offer traders psychiatric treatment for what certainly looks like rapid cycling bipolar disorder.

[Bruce]

I came to the conclusion a long time ago that our media is full of sh*t. They tell you the news you want to hear, rather than what you need to hear. Also, a friend of mine make a good point today. Perhaps the $200 billion lifeline the Fed is offering will help quell any bank runs we perhaps might see in the coming weeks and months? It sure makes sense in the grander scheme of things. Good post Mike.

[Bruce]

Big news on Wall Street today is that Bear Stearns is in trouble. BIG trouble. JP Morgan, CitiBank and Countrywide's stocks are practically reduced to junks status now. And mark my words folks, the $200 billion injection from the Fed is just another band-aid solution. Bernanke & Co will try to keep this game going as long as they can, not realizing they're only adding fuel to the inferno! Keep up the good work Mike. Next week should prove to be very interesting on Wall Street.

[Bruce]

There's one thing that's becoming more and more clear as the enormity of the situation begins to sink in: Bernanke has lost control of the situation. I think it's pretty obvious from the Fed's move on Tuesday that they're now entering panic mode, and it's going to be every man for himself before too much longer. There's already an article in Business Week questioning the Fed's involvement in bailing out Bear Stearns. It's a big friggen' ponzi scheme! They keep printing more and more money of the blue to solve a crisis that has now gone beyond their control. Thanks a lot Ben. You sure do have "Stupid" written across your forehead!

no, no. It's obviously "666"

[Steve B., STL, MO]

"As far as I know, S&P (and its peers) never saw any of the bad news coming, so how is it that they are now able to see the light at the end of the tunnel?"

Nuff said. Great post, Michael.