Reading

Eating Crow

Bears Retreat

Bears continued to concede ground in choppy action on Friday trying to defending the absurd bearishness which had enveloped the markets. While short covering is the primary feature, it is a natural market reaction to a liquidation phase not seen for decades. Signs of an exhaustion bottom are evident by the richly deserved criticism heaped on CNBC where their content was as bearish on the bottom as it was bullish on the top. This of coarse confirming that financial news reporting is clearly the lowest in form and talent.

Populist cries against trading activity however are often misguided and mistakenly compared with valuable elements of volume created from the transactions of price discovery, with the transactional fraud created in the debt leverage business perpetrated by banks and insurance companies. Traders are not the problem. Price discovery includes at times severe devaluations. Though we all would love to have 'our' price, the reality is that prices have to move to discover value. For years, farmers have complained about the speculators in Chicago manipulating grain prices. Farmers would have simply preferred to accept a high price every year for their product. So it is with stocks and real estate. Everyone wants the top tick. Sorry, you lose.

What is amazing is just how little people know about markets and risk, economics and business, politics and government. This ignorance has led to unsustainable gains in the values of assets driven by a pseudo conservatism and by a cloudy notion of free enterprice.

Reading

Money Market Mutual Funds

The Elephant In The Room

All someone has to do is mention China's position in US Treasuries, let alone the Chinese premier, and everyone notices.

Hold and Chop

Indexes trying to hold onto gains over the last couple days with some internal price problems. While the investment side of the market continues to provide opportunities, the price constructs have not been overall friendly for another leg. This may right itself in the coming sessions but will create an obstruction to further gains if not remedied.

David Weidner's article on what is to become of the great minds of Wall Street.

More Important Than Markets

Baseball

Baseball

More Reports

Markets will look at a host of data points this week with various economic reports. The grind of working through fear and panic selling providing continued opportunities for investors. Traders on the other hand will have to keep the blue side ready since it is where the payoff rests as selling remains the treacherous ground subject to nothing for sale rallies.

Reading

Housing

Free Throws

Cheap Enough To Steal

World markets continue to give great opportunities to all the folks who would rather pay up for stocks when the DJIA is at 11,000 than at 7000. Global stocks have entered a frenzy of negativity revolving around the notion that values are now suffering because current bailout plans are supposedly not specific enough for investors to understand and, as as result, it is explained, market participants are having trouble determining value.

Now there is no doubt the process of explaining how the bailout components connect is a bit daunting, but believe me the boys at Goldman, JPM, and Morgan know the particulars. The problem is not that assets are not cheap enough, the problem is they are not cheap enough to steal. In addition, there is this glaring light shining on the terms and conditions, which may not be transparecny in its truest form, but is a lot more light than the Wall Street folks care to have illuminating their deals.

The Fed and Treasury for whatever they have done can be blamed for not being aggressive enough with handling market making as opposed to deal making. Telling the market what you want to happen is not like making it happen. Intervention carries a lot more clout than terms governing deposits. Since each day of trading represents a battle to determine value, market action influences participants immediate strategies. Winning the hearts and minds of investors, traders, or whatever you what to call the collective, can best be done with direct market intervention. Indexes represent the mother of values and is a place where the Treasury and Fed should draw a line in the sand. It would be a lot cheaper to stick a market up a Bear's ass than to continually fiddle with adjustments for the benefit of bank balance sheets. Let the resulting arb between markets create a fail safe where few would dare to cross.

Buffett Bombs

Buffett bombed last year proving there is nothing like a 25 year bull run to make you look like a genius. He claims the rest of 2009 will be bad but also admits he has no idea where stocks are going. That is clear. He also complains a bit about algorithmic trading but evidently knows little about that either. The problem with Buffett, even as well as things such as actively managed mutual funds, is that they are simply buy and hold in one case and buy and bail in the other. Those who trade buy/sell index based instruments will continue to outperform virtually everyone because of dynamic adaptive algorithms. They are continually adjusting to risk while the buy and hold crowd owns risk.