TARP Rhymes with CARP
Investment Research for Online Investors

by John Dalt

02/10/09

Today was the result of government run amok. The market expected Treasury Secretary Geithner to outline specifics for the $350 billion TARP2 program. The banks that are in trouble and ‘To Big to Fail’ are worthless without a backstop on their assets, or a way to unload those assets at a higher price than the ‘mark to market’ accounting rules allow them to value them.

Geithner had his much anticipated press conference at 11 a.m. and financials tanked within minutes.   He spoke in generalities rather than specifics.   Unexpectedly the oil market was up this morning.   It fell after the press conference.    I could not understand what was holding up the crude oil market.   The build in inventories has continued, but price seemed to firm in the last two weeks.   Today it broke lower.   I think it has lower to go, minus market effects from terrorists, OPEC or other outside influences. 

The SwingTrader switched out of long financials at the end of the press conference with a 17% gain in 6 days and went against financials booking a 6% gain by market close.   We also opened a new position in TBT.   That is the 20-year Treasury Double Inverse ETF.   Interest rates dropped today.   When the stock market goes down investors move to bonds for safety, this pushes down yields as more investors compete for the available bonds.   Tomorrow the Treasury is going to hold the largest auction they have ever held.   I expect interest rates to rise due to the size of tomorrow’s auction.   You can read about our SwingTrader service here. 

In Galt’s Long Term Portfolio, we are watching Proctor and Gamble get cheaper.  They gave a gloomy outlook for 2009 on Jan 30, and the stock has gone down since.  They are one of America’s great companies.  They pay $1.60 per year dividend.  When the kids where little I always joked we should own PG and Kodak, because they split my paycheck.  Learn about our Long-Term Portfolio here .     

Where do we go from here?   The market is oversold and may bounce tomorrow from bargain hunting, but the sentiment is sour so it would not surprise to fall further.   We are sitting on support of the Dow with another 20 points of cushion on the SP500.   If we close lower tomorrow, cash will be the most valuable commodity.   Companies have been reporting earnings and most have been dismal.   Here is how bad. 

The market was ignoring bad news; maybe we needed a catalyst to pay attention.   Geithner provided a shock that government does not have a well defined plan to save the banking system. The ‘stimulus’ plan passed out of the Senate to go to conference.   The market threw up on the $350 billion TARP2; the stimulus may cause a case of the Flu.

Will Rogers had it right:
There ought to be one day, just one, when there is open season on Senators.

and

Communism is like prohibition, it's a good idea but it won't work.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

HOME

Back to Top