Ben "Dover" Bernanke

Releasing the information the way they did this week our Federal Reserve was intentionally manipulating the markets. With no clear mention of it Tuesday when they made their scheduled rate decision they come back Wednesday and drop a bomb on traders. For good measure they leaked the information. Right before the market open in a deliberate attempt to jam the futures. Which they did to a degree to which I've seldom ever seen. Bam! Just like that. You can bet somebody got carried off the trading floor on a stretcher.

This is just some shady, sleazy and unethical stuff here. I don't appreciate it and I was glad to see most of the gains come off as the day wore on. These sort of things increase the already substantial risk of being short in this market. But I for one sure as hell don't want to be long.

Bernanke shot his weapon this week. He has more ammunition but the Fed is losing credibility and it's about time. Again, they are a joke. This sort of underhanded delivery in addition to a plan lacking in transparency undermines confidence in the market place. This place is a banana republic. We need to see what the damage is- who is insolvent?- but the only efforts being made by the Treasury and Fed work to further obfuscate.

Today's (Thursday) action was nondescipt. Down big this morning only to rally back to flat- more or less. I covered some at the lows only because I was carrying a lot of risk (and they were down big) but I feel confident in my positions for the most part. Generally though I would prefer to have less skin in the game going into year end simply to preserve gains.

Yields have shot up this week and that bears watching. Dollar also bouncing. Metals got creamed today and I remain short term negative on them. Maintain insurance sized position but nothing speculative. Don't forget the highest month over month gain in the PPI since the 1970's. Whew! That's hot. Fed in a box. Friday we get CPI data.

If we are up much on the indexes I may be forced to take cover and live to fight another day. As much as I want to be banking coin while other traders are going on vacation- working hard when others aren't- wouldn't mind declaring victory and going kayaking.

Sorry Ben Try Again

Banks red. XLF red. Dow up only 75 points. S&P under 1490.

FLIP. FLIP. FLIP. FLIP.

GAME OVER.

Pump Fading

So this morning we were reassured by the Fed that they will take every precaution to avoid the pain. Just what the market wanted to hear. The details aren't important. It was reason to celebrate. And celebrate we did, up 2% across the board at the open.

However as the day wears on the pump is fading. The air is slowly being let out of the balloon. As I type we are sitting right on the key level for the S&P. 1493-ish. This must hold for the bulls. If not the bears may be back in control.

Considering my positioning coming into today I should have been taken out and shot at the open. It wasn't a pretty picture but I expected worse. By 10:30 it wasn't looking too bad. The loss at that point was manageable. I shorted a bit more. By 11 o'clock I had turned green on the day. Shorted some more. Now I'm solidly green and increasingly nervous (as the next bailout could come any time).

When you feel like you should be down HUGE and you aren't usually it's best to stick it out. We have these big up days where I should be getting killed but my losses are manageable. Tells me to be patient through the pain. Today, I feel as if Bernanke personally and deliberately tried to screw me. Has the feel of a hail mary. If anything the action today has emboldened me. I need the key support levels to fall or else I may regret putting so many chips on the table.

Bulls Demand Investing Be Risk-Free

So just when you think that the Fed has grown some balls and stood up to the crack addicts on Wall Street (yeah, right) we hear rumors of another inter-meeting discount rate cut. Maybe by week's end. What an absolute joke our Fed is. The market didn't like dosage so less than 12 hours later we're already demanding more crack. Market participants are DEMANDING that investing be RISK-FREE. There are no free markets. These bulls are all out blaming the Fed for their losses yesterday. Again, what a joke. If you lose money in the market the only one to blame is yourself. Not the Fed, not some conspiracy, not the sun the moon and the stars.

The powers that be will pull out all the stops to keep this market elevated. Every crack in the dam will be met with another bailout attempt. There are no free markets. Comrade Bernanke will just make shit up if he has to. How about we buy up all the bad debt at par? Comrade Paulson will rewrite all the rules. Why don't we just throw out 200 years of contract law and rewrite contracts by government decree? These guys will purposely screw the short sellers.

Hence, money management will be key for bulls and bears alike. I can't stress enough how dangerous of an environment this has become for all market participants.

I, for one, still don't see how this can end well. There are delicious shorting opportunities everywhere but today may belong to the bulls as we look to retrace some of yesterday's big downdraft. I'm net short again and would look to get more aggressive if the bulls can't keep the ball.

Good luck folks. Be careful out there.

Bears Back in the Driver's Seat

We literally crashed through all meaningful support today. This market is like a crack addict. The addict needs more and more rate cuts to get high. 25 bps wasn't enough.

After high sticking and checking the bulls into the boards today I'm shutting the computer off and going to a hockey game. When I get home I'll have 4 or 5 hours of homework to look forward too. Then maybe I'll have a chance to post some further thoughts. Or perhaps not.

Further on the Freeze

From the San Francisco Chronicle :

"But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.

The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it."