Almost There

It looks as if the relief package will come perhaps as early as Friday but more than likely this weekend.  We must have something in place by Monday morning I believe in order to have markets remain calm.  Jack Welch & Jeremy Siegel joined Warren Buffet in showing their support for this plan and pointing out that it can make a lot of money.  I want to clarify something I wrote yesterday.  I said the Treasury would buy these assets for pennies on the dollar.  That may be an exaggeration.  Some believe these assets are worth $0 and perhaps some will be bought for pennies on the dollar.  However, the Treasury is proposing a reverse auction where sellers basically push prices down to where you get to more of a fair market value.  What they pay for the securities is very important.  They need to purchase them at a good price for us as taxpayers so there are gains in the future.  I believe there will be. 

I find it interesting that Barney Frank wants companies that participate in this program to be forced to give warrants to the government.  Everyone was bashing Paulson last week for getting warrants from AIG.  Now, it’s a good idea?  Amazing.

I think this plan will go through and pretty quickly.  I think everyone wanted their face time and wanted to show how tough they are but everyone agrees something has to be done very quickly.  I thought it was a good idea to have the president give a primetime speech last night explaining this.  The Bush administration has had the worst PR department.  They don’t communicate their message effectively and never have.  Paulson & Bernanke are doing the same.  They speak in Wall Street terms and with this much opposition from the average Joe, they need to change their message.  I thought President Bush’s speech was shockingly very clear, concise, and it really explained how we got here and why this is necessary.

I think the market is a coiled spring in the short run.  The trading atmosphere seems as if investors are on the sidelines waiting for this to go through and when something doesn’t happen, the market sells off as the day goes on.  Being this oversold usually leaves to a quick rally.  But, the longer it takes to rally, the lower the chances of a good sustained rally.  I have scaled out of some positions but I’m not making any big moves in any one direction.  I’ve mentioned this several times before but whipsaw risk remains very high. 

So, be careful as it remains very difficult to make money in the short run in either direction.

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2 Responses to “Almost There”


  1. 1 Jack September 25, 2008 at 7:42 am

    Will this plan allow us to start investing in our 401K’s anytime soon? It appears that the politicians that are so-called representing our best interests don’t really care about the “average working Joe”.

  2. 2 Hedge September 25, 2008 at 8:48 pm

    Well, looks like they have broken off the talks at least until Friday morning. Democrats are blaming Republicans for proposing alternative plan. I see that futures have sold off badly and are now back below the July 15, 2008 low. Not looking good right now.


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