big picture: financials

I often follow individual stocks so closely... I forget to look at the big picture.


 I knew the markets were in trouble when I started shorting this week -- and let myself get stopped out instead of waiting for a clearer support pattern to emerge before buying in.

 Now it's quite obvious what's the big headline: CIT.

 They loan to small businesses and a bankrupt CIT is going to shockwave the whole economy.  Credit is going to seize up.  The markets could indeed plummet on another Bear Stearns like fiasco.  AIG has closed below its 20 day MA for the first time since the end of July !!!

 AIG is going to be the first to die here.  It's becoming clear a lot of the bailouts to banks were merely stopgap loans that delayed cash flow problems.  FNM, FRE, BAC have already keeled over.

 Now the stocks I own don't have terrible cashflow problems but they'll be punished as well.   The markets will almost certainly tank now unless.... big unless... the Fed steps in once again.  How could they not?

 Obviously this whole thing is a mess.  It seems the whole rally was just an extended period of hope that the Fed could bubble it all away.  But in the end, the Fed's action can merely delay the toxic debt from hitting critical levels.  Now CIT threatens and more money is needed.  Money the Fed doesn't have.

  Ultimately, I see this is as a great opportunity when value names drop as everyone moves to cash which won't last long.  The cash will eventually find a home again.  But most importantly, Bernanke has no intention of watching the New Depression unfold on his watch.  It's his purpose in life.   So let's see what crazy games unfold now.

   The world is watching.