Buying Time....

Seeing mostly short covering in the financial space. No real buying. The institutions just don't feel comfortable putting money to work in these banks. Why would they? What has changed over the last few days other then Obama and Geithner giving the banks until the end of April to examine their books? Nothing. Do people actually think that in 60 days the banks balance sheets are going to get that much better? With the absence of any bad news has made the news flow very scarce. They say "never short a dull market". So people who have been on the short side making money, are covering their bets for big profits. Just hoping to reload on the short side a little later.

Also of note is Moody's warning of more future losses from subprime mortgages. They are on record stating that subprime mortgages that were originated in 2005-2008 are in a severe free fall state and that banks have not marked these bonds down to acceptable levels. How in the world can we trust the banks anymore, after all that we have been through, they are still in denial over these mark downs? Many of these type of securities have seen downgrades and more downgrades are seen in the future...

The losses for vintage years are as follows:

2005 = 15% of Original Balance
2006= 33% of Original Balance and 42% of all Subprime Mortgages are delinquent.
2007= 35% of Original Balance
2008= 39% of Original Balance

Moody's has put up close to 8000 Mortgage Tranches involving Sub Prime under review for another series of downgrades.

With these type of headwinds, I cant understand or create a scenario where there would a sustainable rally in them.

One Important thing to note - A friend of mine made a good point. He states "if the Government wants to keep propping these banks up with tax payer money...then I can envision a scenario where I would buy them, only thing is when does enough mean enough? How much more money can be earmarked before it becomes unfeasible"?

This is what has made the shorts slightly nervous currently, but the moves you see in these banks are unsustainable. You need more then short covering.

The treasury has stated that any bank with more then $100 Billion in Assets has to go throw the test, and any bank that fails will be allowed access to immediate cash. Again, most of these banks will fail, thus billions more will be wasted propping them up. The market has already come to grips with the fate of these institutions, that is why you have not seen any serious rallies, even when a rally should happen.

The government is playing Poker, but the market has all of the face cards and is calling Geithner and Obama's Bluff. Is the government playing Poker or Russian Roulette?

Let me be very serious and crystal clear! The market is not going to start rallying until the government COMES to their SENSES and NATIONALIZES the BANKS!

We will drift lower and lower every day until some clarity is achieved. The day the news comes out, the market will rally huge...count on it. Its always buy the rumor sell the news...this is the opposite...Sell the rumor....buy the news!

You heard it here first...The market doesn't want any more of these shenanigans. Enough Tax Payer money has been wasted in Citigroup and BOFA. They are all effectively Nationalized already...make it official.

BTW...is anyone else sick of looking at Bobby Jindal? What a clown! The Republicans have 90% of their constituency in White America, yet their advertising campaign is based around Bobby Jindal? A fake Indian?

Trying to Keep The Faith and not get too angry.

Happy Trading.