Futures Up Triple Digits on Bailout
And the Nikkei 225 opened up +306.91 that's plus +2.5% to 12,519.14 as of 9/8 9:15am Tokyo time.
>
I love the headlines that accompany this: Asian Stocks, U.S. Futures Rally on Fannie, Freddie Takeover Yeah! We're all Socialists now!
~~~
Here's your open thread for the night: How much of this bailout was calculated not at "Systemic Risk," but instead at Asset Depreciation, i.e, falling stock prices?
Does tomorrow's gap up hold? Or, is this like all of the previous weekend rescues -- rally, failure, new low?
The floor is yours . . . What say ye?
Sunday, September 07, 2008 | 08:29 PM | Permalink
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A problem, I have no f*cking idea. Sitting on SKF, wondering if I'm gonna eat my shorts over the next two months. Sorry for the bad pun.
Posted by: Youngtrader | Sep 7, 2008 8:34:13 PM
Nah, just a bunch of punters trying to make a quick buck.
As you said--rally, failure, new low.
PS: USD index below 70 by EOY
Posted by: matt | Sep 7, 2008 8:40:00 PM
What has changed on any fundamental level that would sustain a long term rally? The problem has just been shifted from the left hand to the right. The bad loans still exist. Any capitalization by the treasury will be by printing money, not by actual capital flowing in. The housing market is still in the swamps. What is actually different?
Posted by: BobC | Sep 7, 2008 8:41:01 PM
Well, they stuck it to us folks who have been right, AGAIN! bravo Ben and Hank! Thanks for killing the people who are right.
How long will it last? These bailouts (6th one so far according to Steve Liesman at CNBC) have had shorter and shorter rallies. I am guessing 2 weeks. Credit markets will improve. Look for treasuries to keep going down as well. Commodities back to going up. The dollar's run is most likely over. The inflation trade is back on.
Posted by: ReturnFreeRisk | Sep 7, 2008 8:42:29 PM
I think it is 60/40 asset price vs systemic risk. The systemic risk is a real threat but not one that is on our doorstep now. However that systemic risk provides cover for Paulson to give a grand goosing to Wall Street (via a grand fleecing of the U.S. taxpayer).
Regarding the market, it is indeed a case of does it gap and fade or does it gap and run. In my opinion it will gap and run, if it opens up 2% then shorts will have no choice but to get massively squeezed.
**** I think Barry should be required to answer as well. He has previously commented on #1 (asset price/systemic risk), but I don't think he's weighed in on what he thinks the market does in response.
Great coverage over the weekend BR. This has been the one-stop-shop on this story.
Posted by: jason in charlotte | Sep 7, 2008 8:42:52 PM
It looks like a strong rally shaping up but that's certainly nothing unusual in a bear market where rallies tend to be stronger than in a bull market anyway. Not being an insider I still have some shorts on that will probably get killed next week but, depending upon how the rally unfolds, I just may use it as an opportunity to add to them rather than cover. I'll be watching the long T-bond closely.
Posted by: RW | Sep 7, 2008 8:44:27 PM
Everyone knows that there are still a vast majority of small to midsize banks sitting on mountains of toxic waste. This bailout does nothing for them, and essentially throws them under the bus.
This bailout will, and must fail. It pretends to be fixing a wider systemic problem when in actuality it saves a very small piece of the problem.
Suckers will run into the markets this week only to find themselves crushed under the weight of big players stampeding through the exits.
If you're a day trader -- have fun tomorrow. If you're a long - be very, very careful. Financials have a long, long way down before we officially "correct".
Posted by: Popo | Sep 7, 2008 8:44:39 PM
The past week we had a 90 % up day.
Tomorrow, I think it will be another one.
Posted by: In cash | Sep 7, 2008 8:44:54 PM
All these bailouts certainly hurt investors on the short side using put options.
Does the Fed think if they do enough bailouts that the investors on the short side wont have any money to buy put options?
For anyone short individual stocks this is just a delay.
Buying SKF Monday.
Posted by: Owner Earnings | Sep 7, 2008 8:45:38 PM
wtf
I don't think this upleg is the average investor's doing. This is just hedge funds playing another game of chicken with other people's money.
Everybody wants a thrill
Payin' anything to roll the dice,
Just one more time
Some will win, some will lose
Some were born to sing the blues
Oh the movie never ends
It goes on and on and on and on...
Don't stop believin'
Hold on to that feelin'
Journey
Never in my life did I think I'd find myself quoting Journey, but stranger things have (and are) happening.
Posted by: shayre | Sep 7, 2008 8:47:30 PM
The manic nature of this board, general points to important sentiment indicator.
but who knows.
One of the important, Philosophical questions is "Am I my brother's Keeper?". And that question continues to be debated..... But not on Wall Street.
Posted by: Eric Davis | Sep 7, 2008 8:51:35 PM
whether the rally will last past noon I have no idea.
but one thing I can say for sure (having seen him just now on CNBC)...I still don't like Steve Forbes.
Posted by: Bob A | Sep 7, 2008 8:52:13 PM
Does anyone see a new oil rally coming up with a weaker dollar? That might take some of the steam out the rally.
Great blog, BTW
Posted by: Lysander | Sep 7, 2008 8:53:23 PM
Housing still not affordable in most markets, U.S. and global economy slowing, unemployment rising, household indebtedness at record levels, corporate earnings heading south, hundreds of billions of crappy paper and toxic derivatives still not properly accounted for, budget deficit soaring, foreign central banks increasingly skeptical of U.S. credit worthiness. Don't need to be a fortune teller to read the tea leaves: Short, sharp rally, followed by resumption of long, slow grind down to sub-10,000 on Dow.
Posted by: Mitchn | Sep 7, 2008 8:53:48 PM
the rally -- or some facsimile thereof -- lasts until Nov 5
Posted by: scorpio | Sep 7, 2008 8:54:08 PM
This bailout is a complete joke. As much as the government would like to pump up asset prices, it is only delaying the inevitable and exposing the phony US economy for what it truly is.
I will be selling into any market strength in the coming days.
Posted by: Red Baron | Sep 7, 2008 8:55:58 PM
THE BOND MARKET WILL LEAD THE WAY ? INTEREST RATES UP OR DOWN, BOND MARKET ALWAYS KNOWS !
Posted by: icm63 | Sep 7, 2008 8:56:28 PM
High in the SPX should come Oct 1 @1333
Posted by: Paul Boughton | Sep 7, 2008 8:59:08 PM
It will fizzle before it hits our shores...unlike their overseas melt-downs.
Posted by: JustinTheSkeptic | Sep 7, 2008 9:00:20 PM
Japan market up 2.5%-3%? LOL.
Clueless funds are buying. The fun continues.
How does a US bail help japan? It doesn't.
Posted by: John Borchers | Sep 7, 2008 9:06:36 PM
How about Ike? Is there any stock or bond supply pending? HA! Sell second spike/squeeze?
Posted by: kelly p | Sep 7, 2008 9:09:10 PM
I disagree with most here; I think we have already put in the major bottom. This also does have a meaningful change; any ambiguity about what would happen to them is mostly out now. Lastly, govt esentially saying their prior structure was a mistake has to be taken as a serious change; short term harder to get money maybe, longer term positive for the system.
I would also bet that the asset trade is going to have a serious week to the upside.
just my .02
Posted by: Spooky | Sep 7, 2008 9:10:08 PM
my guess: lower USD, higher oil, higher gold, lower stocks
Posted by: cloudy | Sep 7, 2008 9:11:52 PM
Wow! Watch that yield curve flatten.
I have to confess that, while I think all of this intervention is abominable, it is pretty exciting to watch markets react to these frequent bailouts. I'm too young to have seen gyrations like this before.
Hanky P should just pull the plug already. Equities are begging to be put out of their misery.
Posted by: matt | Sep 7, 2008 9:13:21 PM
Suckers rally-shorts are responsible for the futures pop. Once they sell off and hedgies start hitting the exit button, the rally will be but a brief,fond memory. Remember the negative feedback loop is alive and well..the assets backing all this crap are still DECREASING in value. I have been in cash for 14 months and sleep like a baby. Remember, the same a-holes who got us into the mess are now asking us to trust them to get us out of it. Next week, it will be Bernanke pulling another lever, and again and again and again...all the way down.
Posted by: Grant H | Sep 7, 2008 9:15:24 PM
