Nationalization

My January 2009 outlook on the market (Jan 4th entry) and November 15 2008 entry had one basis, that of where are we going with the financial crisis. One of my thoughts then was the financial system might ultimately be nationalized to save it from a total collapse seem to be manifesting itself more and more. Thursday BAC announced that they need more funds from the TARP. A 300% increase in trading losses on the ML acquisition has made BAC virtual a bad bank, where will this all end. The problem we have been having as a culture is to think everything must be big, I mean huge, if my house is bigger than yours I am better off, if my SUV is bigger than yours I am safer, if my army is bigger than yours we are more powerful but this is far from the truth. Banks have been on a acquisition binge from the 1991 recession and thought to buy up anything in site to fit in their stable of inefficient entities. The death of Citibank the inventor of the supermarket model of banking is the result of this philosophy. The death of Wachovia buying that subprime lender which was the end all the same and now BAC buying ML will be the end all for them. The fact is these banks in their efforts to become huge conglomerate moved away from 'banking' thus their demise.
Now what is scary is news that the first $250 Billion of the TARP money to the banks is now valued at $180 Billion, yes tax payers they told us we would profits from the TARP but we are now down 30% in 3 months, some money management!!! What I think will happen especially with BAC asking for more money and let me tell you this they wont be the last is that the $700 billion will be a drop in the bucket. I did some research last year and I said it plain as day the problem might be a 35-50 Trillion problem so what can $700 Billion do? It is serious folks that money will be 100% lost and the only way in the long run to stop the bleeding might be to nationalize the banking system. As I said months ago it has already started in Europe and I see it highly likely happening here.
Warning to those who own bank stocks, they are dead money! and if the government nationalize the system OR comes close to nationalizing it they will have no value, so a complete wipe out of shareholders' value (remember AIG). On that note I will like to explain something to everyone, we are in a BEAR market and in bear markets we dont have 'cheap' stocks. I continue to hear the talking head on tv talk about stocks are cheap, there are no cheap stock in a bear market only in a bull market, PERIOD. In a bear market cheap stocks gets cheaper and these folks who will tell you about P/E ratio etc are idiots because that doesn't matter in a bear market is it is all about Psychology of the markets, nothing else. The market is made up of buyers and selling and it is a virtual mind game. Have you ever heard about the psychology of BIDDING? That's what made EBAY huge, let say you have an items which is really worth $100 and you get 25 people bidding on it, what happens the human nature element of want takes over the logical process and people Bid up an item worth $100 to $200 and that's how it goes. Now it is really worth $200, nope but the process of BIDDING pushed up the price to $200, so now they say the market value of it is $200. This is the same reasoning being all bubbles and bust.
Think about it same thing happened in real estate you heard everyone making money and people saying oh it is so easy and it is sure bet. Hehehehe ask those folks now how much of their net worth have been evaporated in the real estate downturn. What happened was the same BIDDDING phenomenon trying to out bid based on Human psychology than rational thinking. Oh well I am ranting away as usual, but my point is FINANCIALS are dead, period end of story, go FAZ( Our long term play)
Now last night I had to laugh out loud and I mean really loud, CNBC premiered a new show about investing through options and I had to watch it because everyone here knows I love options, hehehhe. It was the worst show ever on CNBC! One dude was actually saying GOOG IS CHEAP, WHAT!!, GOOG is dead and I guarantee GOOG will be sub 200 by end of summer easily and will be $150 within the next 18 months, I mean why is CNBC promoting another show to viewers on HOW TO LOSE YOUR MONIES FAST.
I am very tired and just going to rest this weekend and will be back on Monday night for the weekly update so talk to you then.




MARKETJEDI