I just made a quick calculation, basically, if you consider a bailout plan of $700,000,000,000 and a US population of 300 million, you see how big this plan is. It means that every single person in the US, from the grand-father, the disabled, the 1 month baby and of course you, dear reader, will pay about $2,300 to Wall-Street. Now, how does that sound?
And even worse, if you take into account only the beloved US Tax Payers (according to Wikipedia, they are only 138 million tax payers as of 2007 and which is going to bee soon an endangered specie anyway), the cost per Tax Payer is about $5,000. It means that every single tax payer will have to pay $5,000 to Wall-Street.
So now that the Bernanke+Paulson Put is actually about to be exercised at the expense of the US Tax Payer and more globally, at the expense of every person on planet earth except a few hundred highly paid bankers in the US, we can see the market rallying today. I hope it will go a little bit higher so that I can short it. But let's not loose our focus here.
As I have stated many times on this blog, bad news keep on hitting the wires and every time, they are followed by sucker-rallies. So what happened today?
- Before the market opened, GE made a profit warning, and puting an end to its stock repurchase plan. Result? +4.5%
- Initial claims hit 493,000 where the market was expecting 450,000 (the market was off by 10%)
- Durable orders fell 4.5% where the market was expecting 1.5% (the market was off 300%)
- New home sales fell to 460,000 where the market was expecting 515,000 (the market was off again 10%)
After Market, Research in Motion is getting hammered by approximately 20%, because of their forecasts and sales figures.
We are far from the end, and yet, the markets are still not getting it.
Two very interesting comment that have been made today. These are very important, and not the kind of things you will hear on mass media:
I think the gun to the Congressmens' heads is the Fed is illiquid. Over $600 billion of their $800 billion in balance sheet Treasuries has been lent against this crap MBS collateral. The Paulson Plan will allow banks to take back the crap MBS and get cash for it from Treasury, returning the good Treasuries to recapitalise the Fed. If the Fed doesn't get recapitalised pronto, then the next big shock takes down the central bank. That's the threat that is forcing through this bill.
Warren Buffett, new stakeholder in the megalithic survivor-biased Goldman Sachs, has referred to recent upheavals in the financial markets as "an economic Pearl Harbour". He is a very smart man who knows his history, having lived it and seen it up close. He will know better than most that Pearl Harbour is now understood in well informed circles to not only have been foreseen by FDR, but provoked by FDR in an orchestrated campaign to engineer a war with Japan dating from a plan adopted in 1940.
Warren Buffet knows better than most just how dirty and mean this Bush administration plays. The politically motivated prosecutions of AIG after he endorsed Kerry in 2004 will have left scars, and his advising Obama puts him at huge risk if Rove succeeds with another GOP victory.
He is in the insurance business, isn't he? So think of his acquisition of a huge stake in Goldman Sachs and his endorsement of the Paulson Plan as insurance. Meanwhile, he may just be patriot enough to have provided a coded clue as to what he really believes you can expect.
Karl Denninger thinks that the Fed has been reducing the liquidity even when they claim the opposite in order to get their bill approved by Congress:
Note that this is an intentional drain of slosh, or liquidity, from the banking system. $125 billion in the last four days drained?
You wouldn't be trying to intentionally cause a bank failure or two to bolster your call for the $700 billion bailout plan, or perhaps intentionally lock the short-term credit markets, would you Ben?
If the market has a liquidity crisis, why would you be intentionally draining reserves from the banking system? Don't you think you ought to explain that to Congress?