Just. Wow.

Apple (AAPL) just reported its Q4 numbers. And, um, I think I just wet my pants.

"The company sold 37 million iPhones in the quarter, 15.4 million iPads, 5.2 million Mac computers, and 15.4 million iPods, it said."

Q4 revenues at Apple came in at a whopping $46.1 billion. In just one quarter! And this $46B in sales represents a 76% surge over Q4 2010's revenue figure.

I love Google. I love Amazon. There are many other companies out there growing at an extremely fast clip, offering the best products or services in their niche, and fulfilling a consumer or business need that is totally pervasive today. But whether or not you love the fanboi-ism that Apple has either deliberately or unintentionally created all across the country and the world today, there is one thing that these numbers simply do not permit denying at this point:

Apple is the single greatest company in America today.

There is just nobody even close.

The Market at a Near-Term Crossroads

The Dow Jones Industrials Average is at a crossroads going into today:



That right there is the one-year chart for the Dow. A quick look at the chart will show that we are basically right up against the closing high for the Dow from October 28, which incidentally was 12,231 and change. Wednesday's close this week was at 12,196.

If -- and that is still an if -- but if we can close above 12,231 here in the next day or two, then I would estimate there is a 75% chance that we make a run back up to the highs for the year, which would be around the 12,700 level, probably over the next 2-3 weeks. I have made no bones about my longer-term view that the markets are going to be flat to lower for the better part of the next decade, and nothing I've seen over the past year on Wall Street has made me change that view even a little bit. But, this is just one of those times on the short-term chart where we are sitting poised right up against a very clear top of a very clear short-term trading range. But based on the DJIA'a closing highs, today could be a real inflection point for the markets. If we close above 12,231, another 400-500 points on the Dow seems fairly likely to me in December before we probably top out back around the year's highs. But if this proves to be another near-term top, and we cannot hold the 12,200 range over the next couple of sessions, then I would guess we will probably drop again and end the year somewhere in the mid 11,000's range.

I've got my eyes on a couple of stock options and a couple of leveraged ETFs for a short-term play in one direction or the other right now, but I need to wait a day or two here and see which way the market seems to be going in the near-term from a technical perspective. With options expiring in just a week and a day for December, there could definitely be an opportunity for some nice profits in either direction at relatively cheap prices, depending on the action in the market today, and maybe on Friday as well if Thursday proves not to see much movement in either direction.

Just Desserts

What a one-two punch.

Einhorn's Investments Keep Losing Money

Einhorn's Mets Deal Off

Seems like the guy who is definitely on the top-five list of the most individually blameable for the fall of Lehman Brothers in 2008 and the concurrent shakeup in my own life, is finally beginning to get his just desserts in life. David Einhorn may have donated a couple hundy large of WSOP Main Event winnings to charity a few years ago in an orchestrated public showing of altruism, but behind the scenes those who know the markets in which Einhorn has played know him to be as ruthless and money-obsessed as they come, not only able but readily willing to destroy millions of lives if it means he can make a couple extra billion next year, and maybe get his face in the paper to boot.

If you've had a rough go of life at any point since since early 2008 -- and I know there's a lot of you out there who fit that bill -- you've probably never realized how much of that you probably would have avoided if David Einhorn hadn't played the role he played in the move to overtly sell short and eventually bankrupt the world's fourth-largest investment bank and directly spark the worst global financial crisis since the Great Depression. Of course Lehman Brothers isn't the only company that Einhorn has set out to publicly destroy, but it has proven to be the most far-reaching and injurious of his countless money grabs over the last several years.

SIRI

I've got my eyes on you,
I've got my eyes on youuuuuuuu.
When you drop just a little more
Just a couple dimes closer to the floor
My buy order will trigger and I'll own you!

Thursday Tea Party

So.

Last Thursday we saw the Dow lose 512 points. Friday it rebounded a mere 60 points, and Monday after the S&P downgrade we tumbled another 630 points. Tuesday it was then up 420 points in a rebound, before Wednesday's action took the DJIA back down another 510 points in seesaw trading action. It's only fitting that Thursday brought another huge bounceback, this time up 420 points once again, as investors prove that, more than anything else right now, they simply do not know what stocks are worth today. That's what makes this such a scary, and yet exciting, time to be investing right now. Usually -- during well more than 95% of the trading days out there for sure over time -- investors generally feel comfortable that where the market closed yesterday was a fair valuation of the stocks of the companies involved. That's not to say that everyone who ever bought a share of stock in any company has automatically done some calculation in their head to get an idea of what the company is intrinsically worth or anything, far from it. But as a general statement, stocks the next day might go up a little or down a little depending on the business news of the day, but in general there's not going to be a big revaluation of the whole thing on a daily basis.

That's what is missing right now. With all the uncertainty out there right now as I have chronicled over the past week here on the blog, investors truly don't have confidence that they really know what the market is worth. Like, the whole thing. It's one thing for an individual stock to trade up 5% one day and down 5% the next based on some company-specific news or updates. But for the entire market to move 5% at a time, five out of six days in a row, and in both directions, it is literally unprecedented in the history of the Dow and it gets at what I was describing yesterday as the "historic" magnitude of the past week's moves. It's just plain historic. And it indicates that, much like the FOMC itself, investors are very concerned right now, and know very little about what is going to drive growth in the U.S. economy for what is increasingly becoming a more and more extended period of time into the future.

So don't let the big rallies on Tuesday or Thursday of this week fool you. The bears aren't gone, they just know how to pick their spots based on the news and the circumstances of the day. Give them a rumor of a major bank failure in France, and they'll come out of the woodwork. Throw 'em a really bad monthly jobs report with the unemployment rate jumping a couple percentage points, and the bears'll be there, you can count on it. Any serious talk about another recession, and the bandwagoners will jump ship like the sheep that they always, always are when it comes to their money.

And recession is clearly one of the hot topics among the financial talking heads over the past month or so -- specifically, whether or not we're going into a "double-dip" recession, following up on the recession of 2008-2010. But all that talk about whether or not we're going to double-dip seriously misses the whole point -- we basically already have! A total of 1.6% cumulative growth in the U.S. GDP over the first half of the year? Where I come from, that's basically a recession already. Or a stag-cession, at best. It's no kind of recovery, that's for sure. And that's what already happened, just in the first six months of 2011. It's a good guess that things have worsened in July and August with all stability completely leaving the financial markets. You can argue till you're blue in the face about whether or not we're going to recess, but in reality, we've already been stagnant as a matter of stone cold fact for not just one but two straight quarters, and we're almost surely in the midst of a ho-hum at best third quarter as well. And that means that we haven't heard the last of the bears in the market yet, probably not by a longshot.

I thought I would leave you on this Friday with two videos from the literal guy who literally started the Tea Party movement in the United States a couple of years ago, right on live tv on CNBC. His name is Rick Santelli, and the below rant from back in early 2009 when the Dow was around 7000 and then brand new President Obama had just started talking about loan modification programs to enable Americans who could not afford their mortgages to modify them to lower amounts that they could actually afford to pay. Needless to say, Santelli went off, and inadvertently started an entire movement. The entire clip really is worth watching, other than the short part in the middle when the nerdy guy talks about something or other:



Once you watch that and become a Rick Santelli fan for life, check out this Santelli rant from CNBC just this past Monday morning, just after the S&P downgrade while we waited for the stock market to open in what proved to be a 630-point down day for the Dow by the time it was all said and done. Santelli really "gets it" in a way that most others simply will not allow themselves to get it:



Governor Rick Santelli. I like the sound of that.

Wednesday Reality

Hello? Helllllooooooooooooo? Is there anybody out there?

Where did everybody go who just one day ago was telling you that the market rallied 600 points in an hour on Tuesday afternoon because the Fed pledged long-term support for the market? Boy, that long-term pledge of support sure disappeared in a hurry, didn't it?

Where did everybody go who denied that Tuesday's Fed statement made the FOMC sound overly negative, and overly powerless?

Where did all the talking heads, analysts, and current and former fund managers go who advised you to buy on the dip all day on Monday? Anyone? Anyone? Bueller?

Right back under their rocks is where they went, that's right. Only to re-appear in a month or two and tell you they've predicted this whole move downward all along. But then, that's the shtick that makes any public market analyst survive nowadays, isn't it.

The markets plunged again on Wednesday, erasing all of Tuesday's massive 4% gains in the U.S. and then moving more than a full percent lower than that, bringing the Dow's total five-session tumble to a stunning 1176.50 points, representing a decline in just one week of 9.9% of the full accumulated value over the entire lifetime of the Dow Jones Industrials Average, and I can say from the perspective of a very involved market observer, it has truly been a thing of awe to behold. Even more ominous than the fact that Wednesday saw the markets give back significantly more than all of Tuesday's gains, is the fact that the market sold off hard all throughout the final 90 minutes of trading, and finished Wednesday's abysmal session literally right at the lows of the day.

Make no mistake -- what we're witnessing right now is one of the most impressive momentum struggles between the bulls and the bears that we've had on Wall Street in our lifetimes. Of course the absolute peak of the 2008 financial crisis was even a little worse than what we've endured over the past several trading sessions, but after Wednesday's huge slide, I think it's fair to say that we've officially moved into "historic" territory with this incredible fiasco over the past week in the stock market. It's not quite to "apocalyptic" yet -- in fact, amazingly it's nowhere near "apocalyptic" yet by a longshot -- but in truth, a 10% decline in exactly one week is close to as bad as the whole market at large ever gets. With the situation in Europe seeming to deteriorate almost daily, and with the GDP numbers for the first half of this year finally making clear to Americans for the first time the farce that has been manufactured by the current administration through growing use of government-printed money over the past two years, combined with what I have been telling you was a Fed statement on Tuesday that somehow managed to make the FOMC sound simultaneously as scared and as powerless as I have ever seen them sound, this is far and away the market bears' best opportunity to garner the support they need to force huge downward spikes in the market since the financial crisis finally bottomed out in March of 2009.

It's been two and a half long years for the bears, it really has. Even by bear market standards. The move from Dow 6,600 in March 2009 to Dow 12,810 on April 29, 2011 was one of the single most ferocious bull cycles in the history of the DJIA. Think about that -- the world's leading market index surged a full 94% over the span of just over two years. It was basically impossible to make money shorting stocks, or doing anything other than sitting squarely on the long side in equities, for over 25 months in the U.S. In truth, mostly every bear out there has been pulling his or her hair out for over two years as equities have inexorably risen, seemingly without any valid justification to support such strength, a sentiment expressed by many financial bloggers and other talking heads in the industry repeatedly ever since the market started recovering from the financial crisis.

And now, finally, the confluence of negative events I mentioned above have given the bears their first chance to flex their muscles since March of 2009. And given what the past 25 months have been like on Wall Street, the muscle of the bears can be great indeed, as we saw well back in 2008 and as we're seeing again now in a big way. The bottom line is that these negative guys, and the momentum guys, and the logarithmic trading guys, they all come out of the woodwork in times like this, and they do so in incredible numbers and with incredible strength in their push. We see it every few years like this, even though most market participants seem to be surprised all over again each time the cycle repeats itself. The bulls put up a strong effort around midday on Wednesday after a large opening drop following Tuesday's short-lived rally, bumping up the Dow more than 200 points off the morning lows, but the bears circled the wagons for another sick push in the afternoon, and the final 90 minutes of trading on Wednesday was about as bad as you ever see the markets get. And once it was clear that this selling momentum had started kicking in and that traders were setting their sights on a run at the day's lows, it was like a tidal wave of sell orders flushing over Wall Street.

Given what things look like at this exact moment, the bears' insatiable thirst for blood in the market has clearly not yet been quenched.

The Bounceback

Man, there is nothing better than times like this on Wall Street. Honestly, if you can keep your wits about you and you're not too overinvested in the market, and you have some solid finance knowledge to feel empowered to have a good sense of what's really going on, these unbelievably volatile days are the rarest of treats. And if you're actively involved in the market, you learn to appreciate them, of course the huge up days like today's 5% bounceback rally, but even the massive selloffs like we've seen over the past week. If you know what you're doing, those down days are some of the most exciting times there are, because there are any number of ways to profit from steep market declines, and especially because you get to go bargain hunting for those stocks you've had your eye on for 18 months just waiting for the right entry point.

Tuesday's trading action was simply a spectacle to behold. We opened up like 200 points on the Dow after the clear overreaction of what, 1200 points lost over three trading sessions on Wall Street, but within half an hour the bears had mounted their push, weighing stocks down and pushing the major indices down into negative territory within the first half hour of trading. But just when it looked like the bottom was ready to fall out of the market again, the bulls made their recovery, bouncing the indices off of the flat line and sending stocks solidly higher once again as the bears' early morning push was successfully fended off by those who saw too much value in stocks at Dow 10,800 to sit by without jumping in.

The Dow stayed up 150-250 points or so through the midday in New York, but then as we approached the Fed's FOMC announcement out of Washington, DC at 2:15pm, investors pulled in the reins a bit, perhaps anticipating that there were likely no magic words the Fed statement could include that would quickly address the myriad problems facing the U.S. and global economy at this stage. Within minutes of the Fed's announcement, which I linked to here almost immediately, people very easily saw exactly what the Fed was saying, given that this was one of the shortest and most transparent and straightforward Fed announcements I can ever recall seeing, and it basically included (1) a statement that the economy is clearly much worse than they had expected it would be earlier this year, and (2) a promise to keep short-term interest rates -- which have been at zero since the financial crisis in 2008 -- remaining at zero for at least another two years. This was the first time any extended time period like this has ever been included with this kind of specificity in a regular FOMC announcement, but at the same time, the Fed's obvious fear about the current path of the economy, combined with their lack of any real bullets left in their fiscal policy gun, and absolutely no promise, indication or scintilla of evidence of any intention to launch a third round of quantitative easing or other Fed balance sheet action, made the FOMC statement truly one of the most depressing and pessimistic proclamations I can ever recall being made by the U.S. central bank.

The moment that the bears saw how objectively negative the FOMC statement was, they immediately seized back control of the markets, pushing the Dow from up 200 points to down 200 points within half an hour of the Fed's release to the market's lows of the day, and it seemed we were looking once again at another complete washout as the Dow tested the 10,600 level for the first time in some ten months. It was an extremely impressive push by the bears, who have finally firmly wrested control of this market over the past week or two after basically two and a half years of nonstop bull market action, and the market-savvy could tell that the sellers had decided this was their moment, their chance to really make a splash and cause a scare among the investors of the world. In ten minutes the Dow would be down 500 points again, and there was finally going to be some raw old-fashioned panic again in the markets.

Yep, the bears gave it their best shot at around 2:45pm ET today, buoyed by a shockingly negative and poorly thought-out announcement out of the Fed, but then a strange thing happened. 10,600 proved to be the breaking point for the bulls, and when that level was reached about 15 minutes before 3pm on Tuesday, everything suddenly turned on a dime, and the most massive onslaught of buying I've seen in at least two and a half years took hold, sending the Dow from down 200 to up 430 points, closing at the highs of the day as the market shot up more than 600 points in just the final hour of trading. 600 points up in one hour, just when the bears thought they were about to wring out another day of heavy losses from U.S. investors. Even over the past week's crazy action minute-to-minute, I have not seen volatility like this -- with two huge pushes by the bears of multiple hundreds of Dow points each, combined with a truly epic FOMC fail by historical standards who all but proclaimed that growth will stink in the U.S. for at least another two years -- again since those crazy days in late 2008 when we would be down 700 three days in a week, and then up 550 the next.

The uneducated, the naive, and those who want to appear like they know what they're talking about but who actually have not a frigging clue posted headlines all afternoon and evening on Tuesday like "Investors Cheer Fed No-Exit Announcement" and "Stocks Soar as Fed Announcement Interpreted as Long-Term Support", etc. What jokers. As I've said, the Fed announcement was, factually speaking, about as negative as it could realistically have been. I can't even believe how poorly conceived that statement out of the FOMC was, almost as if it was designed to send the markets into another tailspin, which is exactly what it did within seconds of hitting the wires. There's just no debating that. If you read people in other finance outlets tonight telling you that investors interpreted the Fed decision as an implicit promise to launch another round of quantitative easing, then please don't read that publication anymore because that writer is a fraud and is as naive as the person who bought in big right before last Wednesday's action and then sold everything at this past Monday's close. The Fed has been perfectly clear in several recent FOMC statements when it is planning or expecting to launch more balance sheet measures to support the U.S. economy. They are crystal clear about it on purpose, because it is important to them that investors get the message that the Fed is here to support them. This FOMC statement was simply completely devoid of any such references or inferences, a fact which stuck out like a sore thumb.

Similarly, if you read one of these so-called market intelligence websites or newsletters today that has the audacity to actually put into print that investors bought up U.S. stocks on Tuesday because of the Fed's long-term promise regarding interest rates, once again that person's opinion is not worth the paper it is written on. Seriously, think how ridiculous that is! The Fed has already held interest rates at zero for over two years straight, and anybody who thought at this point, with the Fed's effort having failed to stimulate any real growth for nine straight quarters now, that there was any chance of any time soon seeing the Fed kicking up interest rates is as clueless as the day is long. No, it was already stone cold obvious that the Fed would be holding rates at zero for the foreseeable future, and a promise to do so "until 2013" is barely more than a statement of intent, as clearly the FOMC could act long before then if there is some sustained turnaround in the country's economy and/or inflation rates long before then. The 2013 rate commitment is a red herring plain and simple, and if anything as I mentioned above will surely come to be interpreted by the market as a clear indication of the Fed's expectation that growth will remain very sluggish in the U.S. until at least that time, an unprecedented type of statement out of almost any government office and in particular the FOMC. Anybody who thinks the market went up on Tuesday because of that FOMC statement simply does not have sufficient experience in the market to really know what's going on.

The market rallied ferociously in the final hour of trading Tuesday, but it did so directly in spite of the FOMC, not as a result of it. The Fed did about as much as it realistically could have to scare the crap out of U.S. investors for some inexplicable reason, and when the market had a few minutes to digest the FOMC statement, that is exactly what happened. The market didn't turn positive at all because of the Fed, make no mistake about it. The market turned at 2:45pm today because it had fallen much too far much too fast, and when the bears mounted their great big push, they went too far and made stocks too cheap for the money on the sidelines to stay away. The result was a massive wave of pent-up buying, one that completely overwhelmed the bears as it should have after the carnage we have seen over the past four trading sessions. But make no mistake, that rally was purely a momentum play and nothing more.

And that means that, without actually feeling any support from the Fed after the FOMC statement this week, the huge Tuesday rally cannot be trusted to hold at this point in time.

The Downgrade, and the Fed

Longtime financial equities analyst Dick Bove has publicly been a clueless ass for a long time, including in a big, huge way all throughout 2007 and 2008 while the financial crisis besat the markets and left Bove holding the bag as he preached that all of the nation's largest banks and brokerages would be just fine. Oh, Bove will deny he ever said any of that now -- just like any good Wall Street analyst does with regularity these days -- but I was there, on the inside, hanging on the guy's every word, and let's just say he has been a confirmed clown for a long time and I was sure that would pretty much never change.

But for once, Dick Bove finally got something right. Go read Bove's piece at the link above about the S&P downgrade of the U.S. debt, where he basically nails it, in agreeing with my statement yesterday that we should actually be happy to have only dropped our credit rating from AAA to AA+ given the actual state of our national debt situation. I could read this stuff about people slamming on the S&P for even deigning to consider downgrading America's debt all day long, but my side would hurt from the unending guffaws and knee slapping from what I was sure at first had to be the rantings of people confined to insane asylums.

Here's a good general piece of advice for those of you who are interested in learning more about the financial markets: if someone has posted this week that S&P are a bunch of "idiots" (or insert your other ad hominem personal attack sans any intelligent or sensible justification) for their "flawed" analysis of the U.S. debt situation, quickly delete that bookmark just as fast as you can and don't ever read there again, because that my friends is a person who is simply far too blinded by false patriotism, naivete, or just a general lack of big-picture understanding to ever be able to see the truth. Anybody who thinks that S&P's job is to continue rating U.S. debt as "risk-free" even while there still right at this moment remains a good chance that we default on our debt at some point in the next six months, and while Tea Party and Republican members of Congress repeatedly declare publicly even just today that they are willing to push our country into default if that's what it takes to get our president to stop recklessly spending printed money that we don't really have, quite simply does not have even a basic understanding of S&P's role in the marketplace.

Yes, S&P and all its lesser competitors embarrassed themselves horribly with respect to the excessively positive ratings given to collateralized mortgage securities for years during the past decade. But the suggestion that S&P now is somehow required to continue that incompetence when faced with pretty much the easiest, clearest downgrade from "risk-free" status perhaps in the recorded history of mankind, reflects a lack of understanding about how the marketplace works in general so profound to make nothing else ever said by such a person even worth reading again.

Update: The Fed's FOMC just released their statement following the FOMC meeting in Washington, DC today, and the results are shockingly short on any support for the financial markets in my view. Basically, the Fed is announcing (1) that the economy and the jobs market are much worse right now than had previously been expected, and (2) that the Fed will maintain short-term interest rates at zero -- where they've already been for the past three years -- for at least another two full years. How that is supposed to make anybody feel confidence about the market right now is utterly and completely beyond me.

Which might explain why the Dow was up 210 points at 2:15pm just seconds before the FOMC announcement, and is now tanking big time.

Doesn't anybody in Washington know what to do or understand what is going on these days?

Monday Market Mania

Well that was fun in the stock market on Monday, wasn't it?

Let me start by just personally extending kudos to S&P for finally -- for the first time in several years at least for sure -- actually doing their fucking job and telling the truth, and for showing why they have always been considered and always will be considered far and away the most credible ratings agency in the world today. And especially for refusing to kowtow to pressure from no one less than the President himself not to downgrade U.S. debt as is obviously warranted at this time. In a way, I think we should probably be happy to be retaining even an a AA+ rating from S&P, and I am not the least bit surprised to see our debt only only downgraded but put on negative watch for further downgrades even from here.

I mean, it's highlarious to sit and listen to the President on national tv (for some strange reason today) as well as Treasury Secretary Geithner rage against S&P about how unwarranted the rating cut was and how mistaken S&P's judgment is, etc. When in reality you, me and everyone else in the country all know that, literally less than one week ago, this country was straight-up one or two days away from a debt default. Period, end of story, we were one or two days away from some form of debt default, a fact that was made extremely public by both sides of the debate on a repeated and consistent basis and in a very deliberate manner. Longtime readers will note that I have always been all about owning the consequences of your decisions here on the blog, and when the President and the GOP leadership both repeatedly make the decision to broadcast to the world how we are going to default on August 2, we won't be able to make a $60 million interest payment due on August 3, etc., then shut your holes and don't complain when a ratings agency whose sole job is to determine how likely your country is to suffer some form of a default on its debt, decides that maybe you are no longer worthy of the highest possible credit rating indicating the highest possible confidence that no default is ever forthcoming.

Because, you know, last week everyone and their mother associated with the U.S. government told the world loudly, clearly, and very deliberately that we were going to, you know, default on our debt on August 2 or 3. There was a stalemate on both sides heading right up to the weekend immediately prior to the scheduled default, and in fact the two sides eventually settled the debate generally by kicking the can down the road (sound familiar? It's unbelievable, isn't it?) until December to determine which programs will suffer cuts, and how much, to help stabilize the deficit in this country.

Anyways, somebody tell me again how President Obama goes nuts all week a couple of weeks back about how we're going to default on our debt on Tuesday, we're going to miss interest payments on Wednesday, etc., and then is back on tv a week and a half later questioning how S&P could possibly decide that U.S. government debt is not worth of what is essentially known as "risk-free" status among the major ratings agencies. That is just about the most thoughtless thing I've heard in the entire Obama term thus far. We're obviously not a triple-A rated country anymore in terms of our sovereign debt, and those of you Americans out there who actually have some scrotum should probably be focusing a lot more on what the fuck Moody's and Fitch could mother fucking possibly be looking at in recently re-affirming the U.S.'s triple-A "risk-free" status for its sovereign debt. As one more reminder, this is the debt that was very publicly a day or two away from literal default less than a week ago. The entire issue is really just unbelievable if you have your head screwed on straight.

Oh, and here's one other topic while I'm discussing the markets. This story makes my mother fucking blood boil -- that AIG is apparently going to sue Bank of America for some $10 billion for fraud related to subprime mortgages leading up to and during the financial crisis. And don't get me wrong -- Bank of America are a bunch of shitbags, and that bank -- the country's largest I believe -- could very well be leading the market and the sector lower as people are sure to start really considering that the bank might require another bailout or at the least a solid round of capital-raising in order to right the ship.

But this is AIG -- the company that essentially invented the notion of writing insurance contracts on other companies' debt defaulting over the past decade, accepting hundreds and hundreds and hundreds of millions of dollars in insurance premiums to insure the debts of companies like Fannie Mae, Freddie Mac, Lehman Brothers, Bear Stearns, Wachovia, etc. on the blind, thoughtless assumption that none of these banks would ever actually fail, and that AIG was thus merely being paid "free money" at zero risk to the firm of ever having to pay out those insurance obligations in case of the disaster. This is the same company that, when all of those entities I mentioned above did experience defaults or even bankruptcies or near-bankruptcies, AIG of course couldn't even come close to actually paying out what it owed under these insurance policies, and who thus required a $180 billion bailout package from the U.S. government back in 2008/2009, much of which was paid directly by the way to Wall Street banks straight out of the government's coffers.

And now this same true piece of garbage company wants to recover $10 billion from shitbag Bank of America, for "misleading" AIG as to the nature of the mortgages bundled into securities that AIG accepted millions in fees to write insurance polices on. So AIG employees recklessly chased millions in fees and agreed to write countless insurance policies that the firm could not possibly ever pay off in the event of an obviously realistic set of circumstances (since they actually happened), and now they want to recoup from their clients AIG's losses on those insurance policies? Are you fucking kidding me? AIG, are you out of your fucking mind? The whole mother fucking point of offering up insurance on mortgage securities is the process of doing the due diligence to determine whether or not you are willing to provide the requested insurance, and at what price your actuaries have determined you are willing to offer it. That's the whole fucking point.

I mean, I could understand the claim that Bank of America probably made about a billion statements that turned out to be completely and utterly wrong about its expectations with respect to the value of the mortgages packaged into securities insured by AIG. Every company in America, on both sides of these transactions in fact I am sure, was more or less totally wrong about their expectations for the underlying mortgages in just about any debt portfolio five or six years ago. But how a company with the sophistication level of AIG -- the preeminent insurance company on earth as of before the financial crisis, bar none -- can willingly choose to participate for premiums that it agreed to, as an insurer of last resort in an entire securitization system that was truly hopelessly flawed, ultimately do its due diligence and decide to accepte hundreds of millions of dollars in fees to insure these mortgage securities against default at the prices agreed to by AIG in each and every case, accepting those premiums in exchange for promises to insure those securities and then now try to claim that they were somehow "tricked" by Bank of America with respect to what was in the securities that AIG had investigated before quoting its price to begin with, is beyond me.

And the thing that pisses me the shit off the most, by a mile, is that the U.S. government right now owns 77% of AIG. No, strike that -- Americans own 77% of this company right now, even after a large sale share earlier in the summer to reduce the holding from originally 92% after the company's ridiculous bailouts in 2008 and again in 2009. We own this fucking company!! And we're going to stand by and allow them to try to file downright frivolous claims that by definition would eliminate responsibility for AIG's own due diligence as the leading and most sophisticated insurance company in the history of the world? Literally! Why the shit would we ever allow that? We own this fucking company, big time. You and me brotha, we own this shit.

President Obama: if you're interested in getting someone with a head on their shoulders to at least consider voting for you in the next election, I want to see you on the fucking television, wagging a finger right at the camera, and telling AIG that they either withdraw this refluckulous claim today -- like, right fucking now -- or you are shutting them the fuck down once and for all like the filthy fucking crooks that we all already know they are. And then, let's hope they call your bluff and don't withdraw the claim against Bank of America, so you can shut those assholes down and put every one of those 63,000 full-time AIG employees out of business. You know -- our fucking employees. Mine and yours. How dare those sanctimonious shitpieces at AIG, who are only even employed at all right now by the mother fucking grace of having a two consecutive pussies as president who are just too damn afraid to stick it to the people who deserve it most, now demand the return of $10 billion because they didn't even fucking try to do their jobs and actually size the potential liabilities under the default insurance contracts they wrote. But it's not AIG's fault, right? They were "tricked" as part of the financial crisis by the very clients they were agreeing to protect. How unbelievably AIG of them.

What a load of bullshit. I would happily accept a big loss on our $180 billion investment in AIG at this point if it means putting the company's entire 63,000 full time workforce out of business. Tomorrow.

Stock Market Redux

Wow, it has been a looooooong time since I spent an entire end-of-day commute listening to the financial news like the old days. Except back then it was Bloomberg 1130am in New York, the only option available for full-time financial coverage on the radio in my area. Nowadays, it's the live feed of CNBC -- on the sexy and versatile Sirius Satellite radio of course -- but the point is still the same -- even on the way in to work on Friday, there I was again willingly choosing to forego my usual a.m. platoon between Mike & Mike in the morning and Jason & the GM (both of whom I really like in that format btw) on Mad Dog Radio, in favor of CNBC, listening to people talk about the market, opine about what's next, and speculate all over the place about the key July jobs market data. It's amazing how much the stock market can just grip an entire city like always seems to happen, in New York City for I think obvious reasons moreso than any of the other major northeastern cities where I have lived.

I think pretty much everyone who pays attention to such things could tell by early this week that the market was sick. By Thursday it finally just boiled over with a 500+ point drop in the Dow, and it seems to me that a lot of things might have finally sunk in yesterday for the first time for a lot of people who actually pay a little bit of attention to economic and financial matters. For starters, it is becoming increasingly clear that growth not only will be, but already is truly anemic right now. Last week when the government released a paltry 1.3% growth number for the Q2 U.S. GDP reading -- not nearly sufficient to even really call meaningful "growth" in most economists' views -- the at least equally meaningful but less reported part of the story is that the Q1 GDP reading was revised way down to just 0.4% growth. For those of who you haven't followed GDP over time, take it from me: first-half of 2011 growth of 0.4% in Q1 and 1.3% in Q2 isn't close to satisfactory to the markets. I think it's fair to say that an economy at this state that isn't generating at least consistent 2% growth over time will be viewed generally by the market as downright sick, and that's exactly what people have finally been figuring out pretty much ever since those numbers were released last Friday.

As much as I have fought the urge to turn this blog into a financial blog, making this place a forum for political argument sounds even worse. That said, another thing that is just increasingly clear from the past couple of weeks in Washington, DC is that this country really has no leadership at all right now. The American people are literally starting to figure out this very week that President Obama has done nothing on the economic front but kick the can down the road for the past 2 1/2 years. First it was continued massive bailouts and payouts to Wall Street risk-takers to artificially keep them alive. Then it was the silly, huge stimulus plan that really began the acceleration to this whole debt-ceiling mess we've found ourselves in this year, a stimulus plan which amounted essentially to a bunch of printed money, "creating" short-term demand of hundreds of billions of dollars and flooding the system with money that had to be spent in our economy over the past couple of years. But such provisions hardly ever work over history to actually generate "real" demand -- rather, it is common knowledge that the end result of such programs is generally just a big hole when those funds are removed. Sound familiar here, now two years past the stimulus bill's passage? And don't even get me started on the Obama / Bernanke QE1, QE2 and likely QE3 plans, which amount to -- get ready for it -- essentially to a bunch of printed money, "creating" short-term demand of hundreds of billions of dollars of U.S. government obligations and flooding the system with "fake money". Sound familiar again?

Anyways, I'm not here today to debate whether you think this is the Obama administration's legacy thus far. What I'm saying is that yesterday was I think the day that the people of this country generally really did first begin to realize that what I just said is true about our can-kicking policy, and that now maybe is going to be the time where we actually take our medicine like good boys and girls. Even if you don't believe that yet, American finally started figuring it out yesterday. We have no leadership right now. Not the President -- who has consistently chosen short-term fake gains over longer-term initiatives to actually stimulate investment, create hiring, etc. and has stood playing his fiddle while unemployment has soared -- and not Congress with all the ridiculous infighting, political motivations, pork barreling even in times of national crisis, and total inability to effect much of anything, and let's not forget these are mostly all the same assholes who voted to bail out the Wall Street banks back in 2008 over the objection of the very people of America who these asshats are elected to serve.

Things changed since the 2008 financial crisis. There is going to be less government spending. Much, much less, because these entities simply will have to suffer cuts of funding, many of the cuts massive. Hundreds of billions of dollars worth. Cities and states all across America are technically bankrupt, and we've all seen how close the U.S. federal government came to a possible debt default just within the past couple of days. And we're the most secure, stable government in the world -- just look at this mess over in Europe, where we've already had at least two near-sovereign defaults this year leading to last-minute bailouts, and Greece is looking increasingly like it's heading right back to the abyss once again in the true style of AIG. Those governments will be forced, like America will as well, eventually to enact higher taxation, to help balance out the tremendous loss of revenues the governments will receive due to the slowdown, which will also inevitably take a bite out of economic growth. And make no mistake, there will be a slowdown -- a global one -- as the governments of most of the developed nations in the world decrease government funding for programs, decrease government spending, increase austerity programs, raise taxes, and see their domestic economies shrink somewhat as a direct result, which is by definition a several-year process. The generation-long housing boom and all the little industries whose growth was spawned by it -- from building, to materials and heavy machinery, to retail, and on down the line all the way to the huge boom on Wall Street from all the derivatives and securitization -- also led to what was most likely "over-employment", in that it is entirely likely that some portion of the 17% true unemployment in this country right now are people who may be facing very long-term (or permanent) unemployment, because there probably will not anytime soon be the same number of people employed in America as there were in the midst of all that bubblage, say five years ago.

So like it or not, things changed back after the blowups in 2008. Only, in America -- and in Europe, to a lesser extent -- the Obama policy has been to pretend that these structural changes just didn't happen. Very weak domestic demand because the value of investments plummeted 60% and housing that people already couldn't afford suddenly dropped 30%? No problem -- we'll just print 2 trillion dollars and spend it on the American economy for the next two years. Yeah, that will likely weaken the dollar and cause inflation to rise. So yeah, people might be paying $4.00 for gasoline in a couple of years, and $12 to see a movie, and $4 for a gallon of milk. Then we'll just lower short-term interest rates to zero for a prolonged period, and we'll buy up hundreds of billions of Treasuries over the next couple of years to flood the system with even more printed money to replace all the money that isn't in the system because our economy is really weak. What will happen in two years when all the fake money has worked its way through the system, and we're left with that huge gaping hole caused by all those structural changes that still happened, whether our people like to admit or not?

My sense is that now we are about to find out.

I'm not about making financial predictions here on the blog, but I'm going to leave you with a chart that I think is very interesting in what it suggests we could be looking at here:



This is from Doug Short of advisorperspectives.com, and it is a comparison of the multi-year performance of three major indices after pretty much the three biggest market tops and longest bear markets in modern financial history -- the Great Depression, starting with the market crash of 1929, the Japanese Nikkei collapse, starting from its tumble from near 40,000 in the late 1980s and still going today, and the U.S. bear market that Short describes as starting back in 2000. These are inflation-adjusted ("real") charts though, not the nominal highs and performance of each index. It is each index's performance in percentage terms below the top, plotted on the horizontal axis over 22 years following the initial top of each cycle, in each case adjusted for inflation over those 22 years to produce a "real" graph that bakes in the varying effects of inflation over the three 22-year-periods in question.

What astounds me from that chart is just how similar all three of those graphs look. Not exact, mind you, but just downright similar. Like, they all took almost exactly three years after the top until they finally bottomed from the initial precipitous shock. Isn't it uncanny how closely all three indices made their bottoms, in all three cases it looks like between about 32 months and 35 months following the top of the market? And then after that 3-year top-to-bottom shock, all three of the indices rallied solidly -- albeit with a few ups and downs along the way -- for just about four years, or maybe closer to five years with the current market (in blue), once again in an uncannily similar pattern, don't you think? But then look what happened between years 6-9 (7-9 in the current market's case) -- another huge down period, in our case what we think of as the financial crisis, but look at the Great Depression grey line there, which saw the market lose another half of its total value over the ensuing three years after a ferocious four-year almost unstoppable rally following the big crash in 1929. And Japan in the red, once again losing about 40% of its value over those three years between 6 and 9 years following the market top.

Now, if you look at all three charts starting right around year 9 after the market top, you will see that all three put in very sharp bottoms, almost identically again right at that same point, within just months of each other it would seem. Crazy, huh? In the case of both the Nikkei and the Great Depression, it was an incredible 66% surge in the markets over just two years from years 9-11 that must have felt, I imagine, an awful lot like the past few years in the U.S., where we have undergone a ferocious rally to recover over 70% from the March 2009 bottoms by a month or two ago.

And then I look at what's next after years 10-11 following the stock market top like we are at now on the blue line, if those other two greatest bear markets of all time are any guide. And remember, this past week on the chart above only further confirms the consistency of the pattern so far.

Hmmmm.

Too Big to Fail

Those of you who subscribe to HBO will have undoubtedly seen "Too Big to Fail" by now if you ever channel surf like I do. I watched it last week on the main HBO -- not HBO2, HBO3, HBO Comedy, HBO Thriller, or HBO Financial Meltdown Documentaries. The movie was done with most of the style and flair that HBO has become so well known for by now over the years -- excellent writing, good character development, a very strong cast, and of course the best pre-written plot money could buy -- and the end result was really quite an enjoyable watch for me. I ended up staying up past midnight watching -- kind of shades from back in the day when I used to be permitted to stay up all night playing online no-limit holdem mtt's -- and believe me, nowadays for me to be up past midnight is almost unheard-of, post April 15.

But the thing that struck me the most about my watching of Too Big to Fail last night is how much it still moves me. It's going on roughly three years since I left Lehman Brothers out of fear for the company's future and for my job, and yet I still could not peel my eyes away from the tv screen. As I sat and watched a pretty true to life portrayal of brash former Lehman CEO Dick Fuld by James Woods, John Heard's Joe Gregory and even a small portrayal of Lehman CFO Erin Callahan, the emotions of it all just came pouring back. They really did. The hatred I felt for Fuld there at the end. The despair showing in his eyes as he begged first his competitor investment banks, then other larger commercial banks, and eventually even the Japanese and the Koreans for a lifeline to keep his company afloat, and especially the anger and disappointment while Fuld watched Paulson, Bernanke and co. bail out AIG for over $150 billion just days later. Watching Woods' portrayal of Fuld screw up the investment deals that would have saved the company at the last minute as is commonly told really happened by those on the inside back in 2008 just makes my jaw drop, true today just as much as it was three years ago. It really was an amazing, incredible time in this country's history, and in a lot of ways -- strange as this is to say -- it was almost a privilege in some ways for me to be able to be a direct part of it as much as I was.

The other thing that I think a lot of people will take away from Too Big to Fail is the portrayal of Treasury Secretary Hank Paulson in the movie. While I think most of us will always think of a bulldog, ramming idea after idea down the throat of Congress and the American people, and the guy who presented the bill for a $750 billion bailout of Wall Street without any controls whatsoever on how Paulson could dole the money out, to whom and for what purposes, this film portrays a different side to the man who spearheaded the movement to avoid the second Great Depression in the United States. While Too Big to Fail seems to me to paint a picture of Tim Geithner as a desperate, gym-addicted, almost whimsical inputter into the country's handling of the financial crisis, the movie tells the story of a hopeful, incredibly solid, formal and almost compassionate Hank Paulson, worrying almost singularly about how to protect the country and solve the worst financial crisis in several generations. While Paulson always seemed calculated and cold-hearted to me in real life while the whole mess was hitting the fan a few years back-- perhaps that is my green Lehman blood still flowing -- HBO portrays him as a deeply concerned and caring man, literally unable to sleep at night due to the constant worry about how to fix things for his country. One of the most moving scenes of the film to me is almost a throwaway, when Tim Geithner calls after another session at the gym and tells Paulson that the financial bailout bill looks like it's not going to pass Congress, and Paulson gets this look on his face like he is literally sick, puts the phone down, and then runs into the bathroom and retches. That's just not the image I ever had of the former head of Goldman Sachs, and I think the distinction between what most of us likely think of Paulson and what the makers of Too Big to Fail obviously want you to think may be one of the highlights as well for any of you out there who choose to watch.

Yeah, it's been well over two and a half years since the events of September 2008 changed Wall Street, and America, overall forever, but to me for very personal reasons the events still feel like they were just yesterday. Watching Too Big to Fail on HBO this past week was like a blast from the past, and even though reliving much of what I lived through that year is not exactly what I would call enjoyable in the strict sense, I have to say that, with a little bit of time under the bridge at this point, I thoroughly enjoyed HBO's take on things. If you find yourself with a couple of hours to kill and you are anyone with an interest in such things, I bet you'll be glad you took the time to watch.

The Latest in Government Propaganda

Other than a little more than two years ago when events in the stock market and the financial markets worldwide took over center stage of the attention of everyone in the free (and not-free) world, I have tried hard not to make this spot into a stock market blog. There's a lot of reasons for that, but basically it comes down to the fact that I've already been there and done that. I've mentioned this a couple of times before here on the blog, but a long time ago, back when the internet was truly in its infancy, I stated a stock market website that essentially met the exact definition of a "blog" even though nobody was using that word back then. This was the mid 1990s, when other than maybe by a couple of freaky guys wearing black nail polish and spiky hair while living in their mommy's basement hacking away on the newly-discovered internet (thank you, Al Gore), today's "blogs" were simply referred to as "websites", or maybe just "URLs" by the dorks of the world. But that's what I had -- a stock marker blog. I kept it going, updating daily, for several years. I even turned it into a nice little side business, selling some regular financial information and predictions for a monthly subscription. I had a credit card machine, a merchant account with a local bank in southern New Jersey, the whole kit and caboodle.

But that all ran its course. After maybe 6 or 7 years of regular updating and provision of financial information, the grind eventually took its toll. Sometime in 2004, I stopped updating that site, and I don't foresee myself reopening that part of my life anytime soon. Don't get me wrong -- I still love the stock market, I still follow it like a hawk every single day of my life, and I'm sure I always will just like I always have since I was a kid. But having to follow things closely every single day, having to make picks and predictions for paying customers day in and day out, and just generally being subject to accusations of being wrong, being an idiot, having my head up my ass, etc., it really turned into a serious drag after a while. Given that investing directly impacts people's money, I found after several years, after weathering the dot-com bust of the early 2000s, and everything else in between, that I just didn't want to subject myself to that kind of public scrutiny anymore, so I stopped it. And as I said, I haven't looked back on that decision at all, despite those couple of months in late 2008 when all I could think about was the market, the financial sector, and the Wall Street engine that completely and totally makes the city where I live go. And to this day, even though I have a lot to say in my personal life about the stock market almost all the time, I try generally to keep that out of what I write about here, preferring to limit my opportunities for public embarrassment for my predictions to areas like football games, baseball over-unders, things like that.

All that said, this story has really got me chuckling today. GM's new IPO has been expanded by 31%, huh? Due to extensive investor demand, you say? Oh, and this move just happens to decrease the U.S. Treasury's stake in the new GM from 61% to 26%, as most of the additional shares being offered will come straight out of the government's stake. That is just so convenient, isn't it?

One thing people don't know is that the first step to being a smart, successful investor is always going to be using your common sense. I'm not saying that any untrained, inexperienced person can use their god-given brains and become a millionaire by speculating in metals, coffee beans and index futures -- far from it, of course -- but at the same time, I've always counseled anyone who has asked me that, if you don't understand what a company or an individual investment really is, how it makes its money, and certainly if you haven't even got a basic understanding of the financials and the relative valuation of a stock, then you have no business investing in it. This isn't the kind of thing that you need some kind of a finance degree to do either -- but I always have to chuckle when people complain about losing money in, say, some biotechnology stock, which they bought at $40 a share and now it's at $3 a share, when the company never had any earnings (or any real prospects for earnings) at any point during the time they've owned the stock. Only a fool puts his money into a company without having at least a basic knowledge of what the company does, how they make their money, and what level of sales the company has generally in comparison to its valuation in the market. I mean, if you invest in a company with $10 million a year in revenues, when that company is currently valued at $5 billion in the marketplace, without some very clear reason why you think the gap between those two numbers will narrow significantly in the near term, then you're just asking to be separated from your money.

So about GM. Remember, this is the company that lost market share for its cars basically every year from 1959 through their bankruptcy in 2009. Every. Single. Year. As a general statement, the company hasn't been responsive to the needs and desires of American car buyers -- for generations now, mind you -- and they still have the most bloated, overextended distribution network in the modern car-selling world. In the end they didn't close nearly as many of their dealerships as was originally reported they were going to have to close, and as such the new company will still have something like three times as many dealerships in their distribution, sales and service network as their profitable foreign competitors in the U.S. They were able to renegotiate some of their ridiculously over-fluffy benefits for current and past employees with the UAW, but again not nearly as much as was agreed they needed to renegotiate back when the bankruptcy was imminent a year ago. And most of all, what changes has the company made as far as the cars they are going to produce, both in terms of selection and quality? Have you heard of any substantive changes on this point? Me either.

The new company is basically a slightly-better-but-still-generally-all-the-same-problems General Motors. I couldn't help but break a smile when I even saw they were emerging from bankruptcy and heading for such a large IPO, and frankly I can't help but laugh every time I read anybody talking about what a good buy the new GM stock will be. As the company prepares for potentially the largest IPO in human history, the government now wants investors to believe that this thing is just so oversubscribed, that there is just so incredibly much demand for shares in the new General Motors, that they are having to increase the number of shares offered by a whopping 31%, something I'm not sure I can recall happening in any IPO in my memory. And this huge increase in shares will just happen to bail out the government to a significant degree of the absolutely, unprecedentedly massive share it recently took in the company in bailing them out a year ago?

Come on. You don't have to be trained or experienced in finance in order to see what is going on here. If you simply refuse to put your money into something whenever you do not have a clear sense of the value, of where the impetus is going to come from for a company to grow and a stock to move higher over time, you'll find yourself consistently not on the losing side of trades that never had a chance to make it in the first place.

Lehman Brothers Book Reviews

Recently I took the time to read through the two books recently released about the fall of Lehman Brothers -- A Total Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, by Lawrence McDonald, and The Murder of Lehman Brothers by Joseph Tibman. The author of the former was a vice president in the firm's distressed-debt department, which means he was at the bottom of the upper class of Lehman employees, and in the good days he was a guy making 7 figures a year. The author of the latter, Joseph Tibman, is unknown, as that name is simply a pen name for "Joe The Investment Banker Man" in an attempt to retain his anonymity. He was, however, an investment banker for Lehman Brothers over the several years prior to and leading up to the firm's collapse. Both stories give some decent insight and stories, clearly from insiders with each their own perspective on what happened over the final few years for the 150-year-old firm that went bankrupt to spark the U.S. market collapse late in 2008.

A Total Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers is the first book I read on this topic, obviously of special interest to me since I worked at Lehman for its final few years of existence myself and have my own set of experiences, preconceived notions and ideas about just what went wrong and when at the storied investment bank. I enjoyed this book, as it tells a good story from start to finish, albeit IMO focusing a bit too much up front on McDonald's former life before he got his start in investment banking as a convertible bond specialist. But McDonald does a good job of telling the story from the insider's perspective of Lehman's amassing of hundreds of billions of dollars of toxic real estate assets. The author does I think a very good job of giving a basic understanding of the derivative type of financial products which got the country's banks into this mess in the first place -- CMBS, RMBS, CDS, securitization of bonds in general, etc. -- and what Lehman Brothers' role was in the expansion of such financial instruments. McDonald worked in the fixed income division of Lehman, which is where all the shit hit the proverbial fan in 2007-2008, and as a result you really do get a very cool look from the inside from a guy who literally sat on Lehman's proprietary trading desk over Lehman's final few years, including several moments of foreshadowing where, according to the author, the directors in his area called the financial crisis a good couple of years before everything finally collapsed. The particularly good inside stuff in this book includes the stories behind some of the big trades made by Lehman with its own account both for and against subprime mortgage companies over the several months as the credit crunch first began in mid 2007 and into 2008, and especially the details of the secret meeting of 20 or so of Lehman's top managing directors in late Spring 2008 at a swank restaurant in the Upper East Side of Manhattan where it was decided that CEO and COO Dick Fuld and Joe Gregory were going to be overthrown.

One of the downsides to getting this particular insider's view, however, is I think the importance that McDonald seems to put on his group having seen the light all along with respect to the bets Lehman Brothers (and many other large banks) were making on real estate assets. To believe this author, his group and his group alone knew all along that Lehman was betting the firm on U.S. and eventually globally real estate prices continuing their inexorable march upwards, they regularly tried to scream it out to anyone who would listen, but unfortunately his smart leadership continually got pooh-poohed, silenced, or even pushed out of the firm if they did not simply back down from their calls for better risk management. In truth I am sure the reality is somewhere less clear than that, but for whatever reason this is the spin we get from reading A Colossal Failure of Common Sense, which to me smacks of self-servitude and untruth.

The other big downside to this particular book is that McDonald was laid off early in 2008 as the fixed income market deteriorated, and that is where the inside scoop and other details of the daily goings-on of the core of the firm really start to grow thin, because the author was no longer employed by Lehman Brothers and was no longer around in the thick of the battle day in and day out. And unfortunately for McDonald, mid-March -- just after he was laid off -- was the beginning of far and away the craziest, most volatile and ultimately most interesting part of the whole Lehman Brothers saga, including the collapse of Bear Stearns and then the several months of slow-motion downward sprial that eventually led to Lehman Brothers' bankruptcy and liquidation. To have all this great inside insight into what things were really like at the firm from 2005-2008, but then not have any personal insights regarding the period from March 2008 through to September when the firm filed its historic bankruptcy, causes this book ultimately to land far short of its potential if written by someone who stuck around the four walls of 745 7th Avenue all the way through to The End.

The Murder of Lehman Brothers does not suffer from this particular problem. Although the author intimates that he, too, lost his job in the wake of Lehman Brothers' bankruptcy declaration and subsequent sale of the U.S. investment banking business to the UK's Barclays Captial, he at least was present all through 2008, which is really where the rubber met the road on the fall of the company, and ultimately it's what everybody wants to read the most about. Joseph Tibman represents himself as a longtime Lehmanite, different from McDonald who only joined in 2005 while the credit bubble was still ramping up, and as such he includes some more details of the recent history of the firm, and in particular the rise to power of Dick Fuld as CEO of evnetually the nation's fourth largest investment bank. Tibman, like McDonald, does a good job of describing the process behind Lehman's amassing of billions of dollars of overinflated real estate assets. Tibman, being a more senior officer of the company than McDonald (who was just a vice president), also has probably better insights into the character of the leadership of the firm, the changes in the company's CFO, lead Risk Manager and COO along the way and what was really going on behind the scenes with each.

With all of the senior-level focus of The Murder of Lehman Brothers, though, Tibman ends up focusing more on that but less on telling a good story, which shows as his book almost reads more like a factual report whereas McDonald's attempt to chronicle the fall of Lehman reads more like a novel. And although Tibman does not attempt to make his own department look like the only people in the company who foresaw the firm's impending doom and tried to stop it, Tibman does in his own way spend a little too much time glorifying the investment banker lifestyle that he was ingrained with. Believe me, I've worked plenty of hard and potentially mind-numbing jobs in my day and I most definitely do not need a speech about how i-bankers are the best because they live in the moment with each deal, totally engrossing themselves, available 24-7, weekends, holidays, vacations, you name it. That sounds an awful lot like my current job as well as those I have held recently, and that bit gets a bit old for me just like McDonald's insistence on trumpeting up his own people and managers like they were the all-knowing ones trying to save the world.

In the end, there are a couple of themes conspicuously common to both books that I thought makes them worth mentioning here. First and foremost, the utter and complete hatred and disbelief towards Dick Fuld, and even more surprising, his #2 in command guy Joe Gregory. Each book absolutely shreds Fuld, depicting him as completely out of touch with what his firm was actually investing in and the positions it was taking, with Tibman repeatedly referring to Fuld's "castle" up on the 31st floor at the Lehman headquarters and how he continually withdrew from seeing anyone but his top lieutenants. Each book also saves special criticism for Joe Gregory, a guy I used to see all the time in my days at the firm, with both authors essentially blaming Gregory for the firm's insistence on building up its real estate portfolio, even in some cases without Fuld's active knowledge or blessing. This surprised me, as I can tell you that within the firm Gregory was not identified as being particularly responsible other than as someone who simply carried out the orders of his superior in Dick Fuld.

The other person who gets absolutely lambasted in both books is Treasury Secretary Hank Paulson, the man behind the massive financial bailout package as well as the guy at the helm when Lehman Brothers ended up being allowed to fall. Basically, both authors prominently advance the favorite invective among former Lehman employees that Hank Paulson made the most disastrous financial decision in the history of the country in allowing Lehman Brothers to fail, and both authors go on to place the blame for the resulting crumbling in equity prices around the world squarely on the mantle of that decision being made. On this point I believe both authors totally miss the mark and like I said each falls victim in my view to the standard response of Lehman employees whose lives were thrown into total tumult as a result of the bankruptcy. But even with the benefit of hindsight, even having seen what happened to asset prices immediately following Lehman's failure, not only do I not think Hank Paulson "caused" the last and worst wave of the crisis by allowing Lehman to fall, but I tend to think of not bailing out Lehman as the one bright spot in what was otherwise a comically horrible run of decisions coming out of Treasury, the Fed and the rest of the Bush administration during late 2008. It's sad to me in a way that the authors of both of the books to come out detailing the fall of Lehman Brothers are unable to divorce themselves from the dogma that Lehman internally fed to its minions for months and months leading up to the firm's eventual downfall. But back at the time, basically nobody I know wanted the government (read that as "us taxpayers") to bail out Lehman Brothers, and the moral hazard argument simply has to stop somewhere lest we risk every financial institution knowing that they can risk whatever they want, act as recklessly as possible in pursuit of high returns, comfortable in the knowledge that the government will save them if things go sour. So no, I don't agree at all with the conclusion of both Lehman books that Paulson's greatest mistake was in allowing Lehman to fail. As I said at the time right here in the blog, I think Lehman should have been allowed to fail, after its CEO made very obvious gaffe after very obvious gaffe as his back got pushed closer and closer to the wall all through the spring and summer of 2008, and in fact I only wish that Hank Paulson had done a little more of "let failing" and a little less of "bailing out" than he did do throughout the financial crisis in 2008.

The last thing I would mention is that I also think both books did a sorry job of capturing some of the more generalized, less mortgage-specific mistakes that in my personal view as my own sort of insider clearly led to Lehman's downfall. For starters, Lehman Brothers, more than any other bank and frankly more than any other company I've ever heard of, insisted on clearly differentiating between the worth of its "front-office" people -- the revenue centers for the firm -- and the "back office" -- the cost centers. Sure, every large company has a lot of both, but at Lehman this differentiation was purposefully palpable -- almost like a modern-day caste system -- and not a day went by when you weren't impacted by it in some way. The firm's headquarters at 50th and 7th Ave in midtown was essentially reserved only for the revenue people. If you weren't directly generating revenue for the firm -- ie, if you weren't in the fixed income or equities divisions, a trader or a banker in some form -- then you could not even sit in the same building as the revenue guys. Instead of the posh Lehman-owned space in the HQ building, us back office folk were relegated to rented space on floors of other nearby buildings, sans the amenities and sans the cachet of working over at 745. The back office people had a nice holiday party ever year, but you should have seen the investment bankers' party which was always held on the same night but at a much more expensive (and fancy) location. The back office had a separate summer intern program from which I hired an intern in each of my three full years at the firm, but again the events, the expenditure, the opportunities were nothing compared to the business units' summer program, which was lavish to a fault. And the end result of all this palpable and deliberate focus on the non-revenue guys being second class citizens within Lehman had a dastardly effect on the firm in 2008, because among other things, the back office squarely included the Legal, Audit and Risk functions for the firm. When I see such a massive and clear failure of the firm to adequately protect itself in a period of flux in the marketplace, and yet the very functions like Legal, Audit and Risk being treated as lowlifes by the Brahman bankers and traders, more or less ignored for the most part company-wide, it becomes crystal clear that this was a major oversight on the part of Lehman's management that surely had a noticeable effect in the firm's last couple of years. Being a trader and a banker, the authors of these two Lehman books were both too hopelessly on the inside (and at the top) of this quasi-caste system to even see it for what it was, but the in my view the firm suffered immeasurably from this top-down belittling of the importance of the firm's back office functions to the long-term survival of the company.

The other factor which was totally ignored in each book but which I contend played a major role in the downfall of Lehman Brothers was the inexperience of the people in management positions at the firm, another thing I have also written about extensively here before. This was a bank where, for whatever reason, a ton of junior-type of people and less-skilled people received promotions and were, by the time the mid-2000s rolled along, occupying many positions of importance within the firm. I personally worked with multiple managers in the risk management function of the bank who were young -- as in, "never before seen a bear market" young, or "weren't even working in finance when the dot com bubble burst not that long ago" young. It was hard enough for any experienced risk manager to be able to decipher the mess of subprime and Alt-A mortgages that were packed into these complex mortgage backed securities that Lehman was amassing and selling in its last few years. To ask a young kid, someone who's never even lived through a time when the market's general bias is downwards, who's never lived through a real-life financial crisis of some kind, to be able to appreciate that risk, let alone to adequately hedge against it, is sheer folly. Similarly, not just some but most of the manager- level traders I used to work for at Lehman were young guys -- in their 30s, some even their 20s, and these were the guys being entrusted to run many areas of the firm's trading desks, to make decisions that impacted the firm's revenues and profits in a direct way during what proved to be a violent inflection point in the marketplace. Shit, even my own boss at Lehman was a 30-something, a guy with absolutely zero prior management experience, and boy did that ever show in how he ran our group. And this was not atypical at all at Lehman -- in retrospect, it was like a bunch of little kids trying to masquerade as if they were running the firm, doing all the "big people" jobs that they all could not believe they were able to land at such young, inexperienced times of their lives. And the result? Extreme pain.

In all, I did enjoy reading both A Total Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, by Lawrence McDonald, and The Murder of Lehman Brothers by Joseph Tibman, but it's hard for me to know how much of that is translatable to those who were not also on the inside while the whole thing went down in 2008. The McDonald book overall is a better story -- more of a true novel, as I mentioned above -- while the Tibman book does a much better job of describing the details of what the final six months or so was like for people working inside Lehman during the firm's final slow-motion collapse to nothing. Each book contains some good discussion of what went wrong with the firm's bloated real estate portfolio, and each is full of the standard ex-Lehmanite rhetoric about our former CEO and what an egotistical, blinded buffoon he clearly was. But at the same time I think each author missed a golden opportunity to really tell the story of what took down this firm, probably because each of them was hopelessly on the inside of the systemic problems I was able to see as so prevalent so easily in my time at Lehman Brothers.

I would be interested in comments from anyone who might have read either or both books, or any other similar reading regarding last year's massive changes in the investment banking landscape.

Dow 10k Re-Re-Redux

With the Dow Jones Industrials Average making its triumphant run to its first close back above the psychologically key 10,000 mark as of Wednesday's close, I find myself taking stock (pun intended) of where we're at, how far we fell and how ferociously we have come back. But despite the huge losses of 2008 and 2009 in the major U.S. indices, and despite the massive 50-60% rally across the board since the ridiculous March 2009 lows, I keep coming back to that same damned theory that I've written about before, something I myself first theorized way back at the end of the 1990s when the Dow first flirted with the mythical five figure level -- that key psychological levels through history in the market have always taken many years -- a generation or so, typically -- from the first time we cross those points on the upside, to the last time we cross them before moving well beyond that level never to touch it again.

I've written about this theory several times before here over the past year, but every time we cross back over the 10k mark on the Dow -- either on the upside or the downside -- I find myself feeling that deja vu of having seen this level many times before, and my resolve and belief in the correctness of that long-term Dow theory strengthens somewhat. For many of you out there, the horrific plunge in the market over the past year might have forced you to pay more attention to things like the Dow Industrials, the Nasdaq, and even your specific portfolio based on what was going on as you actually felt your net worth shrinking by what seemed like leaps and bounds, some of you perhaps for the first time in your lives. So, the Dow being at 10,000 again might seem like a major move to some, but in reality the Dow has crossed back and forth over this mark more than a handful of times since first touching it back in late March 1999. In fact, the Dow has crossed above 10,000 on a closing basis 26 separate times in the past ten years, and that doesn't even come close to capturing how many times the index crossed 10k during the trading days themselves. Following is a chart from CNBC of all of those 26 occasions where the Dow closed on either side of 10,000 on two consecutive trading days:

Dow 10,000 Crossover History

So you can see, the world's most closely-watched stock index is no stranger to clawing its way up to and over the 10,000 mark. And, if you look at that chart, you can see that doing so does not mean a whole lot on a medium-term basis as far as the index holding that level.

The first time 10k was hit was back in March 1999, and it took only about a week bouncing above and below 10k before we moved comfortably above on the way to 11,000 by April of that year, and roughly 11,500 by October 1999 which proved to be a near-term top for the markets. By February 2000, you can see by the chart on the right we closed back below 10k for the first time in close to a year, where we dilly-dallied for another couple of weeks before again remaining above 10k for the next several months. We closed below 10k for one day on October 18, 2000 but then spent until the following March again mapping out ground back in the 10-11k range. After just a few days in March 2001 below 10k, we jumped back above until that summer when the fallout from the internet bubble bursting combined with 9-11 to send the Dow back into the 8000s on a closing basis. Investors rallied to the buy side smartly as the nation recovered from the 9-11 disaster, sending the Dow back over 10k in December 2001, but unfortunately the economic fallout from the terror attacks cast a pallor over the market and kept the Dow well below the 10k level for most of 2002 and 2003 despite six separate successful closes above the mark at various times over this period. 2004 was a year where the market tried to find its footing as the economy began growing again, and after flirting with 10k over and over during the year, finally on October 27, 2004 the market moved back above 10k for a sustained period, one which many thought was the last they would ever see of Dow 10k as the index rallied strongly for four years, topping out in October 2007 at over 14,100. But the credit crunch and then the events in the banking sector late in 2008 made Dow 10k a reality all over again, taking the index as low as 6500 and change in March 2009 before this massive rally has once again lifted us to a close back above the 10k level here on October 14, 2009.

What does all this mean? For one thing, don't expect to be done with Dow 10k over the near-term just yet. A quick look at the above chart shows that, the first time we hit 10k in 1999, it took 3 crosses back and forth on a closing basis for the index to finally sustain a move above the five-figure mark. In 2000 there were another four Dow 10k crossovers, and six more in 2001. Five more times the Dow passed over the 10k level in 2002, finally crossing back to the upside in 2003, and then bouncing again around 10k six separate times in 2004 before embarking on the mid 2000's rally that eventually led to 2007's historic Dow top.

So, in the near term, it is probably reasonable to expect at least a few closes below 10k before investors decide if this rally is going to continue to grow -- and then stick -- or if it's time to take a breather after the most ferocious short-term rally in U.S. stock prices since the Great Depression. And, more importantly, on a long-term basis we are also probably not out of the woods yet. Recall from earlier posts here that Dow 100 took about 26 years from first touch to last touch, and Dow 1000 similarly took over 20 years from first to last touch. If we follow that same pattern, then it's only now been 10 1/2 years since we first touched Dow 10,000 back in March 1999, so we could be only halfway to the point where we are finally above and done with 10k once and for all.

Dow 9917

You heard it here first -- Wednesday afternoon could have been it.

About a month ago, I posted here in response to the number of comments I was hearing about how ridiculous the huge recovery in U.S. stock prices had gotten, as at the time the Dow Industrials had jumped from a low of 6600 and change back in March of this year to around 9100. At the time I posted a largely contrarian view, that the Dow was likely in for another 10-15% rise to right up near 10,000, before I figured it would be destined take a seat after a very likely bounce off of the key 10k level.

Well like I said, Wednesday afternoon, just before 3pm, might just have been the top:



Although the market was weakish in the morning, come afternoon time and word at 2:15pm that the Fed plans to keep interest rates effectively down at zero for the foreseeable future, and the buyers started emerging from the woodwork in typical quick-reaction to a seemingly favorable Fed decision. Within half an hour or so after word from the Fed, stocks were at the highs of the day, and the Dow Industrials crossed the 9900 mark for the first time since the financial meltdown more than a year ago now, briefly touching the 9917 mark for less than a single percent below Dow 10k.

But then everything just fell apart. Suddenly it wasn't interest rates remaining near zero that the traders were whispering about. After a short while to reflect on the Fed's decision, one tidbit started to stand out more and more -- the Fed's concurrent announcement that it would ramp up the slowdown of some of its trillion-dollars-plus of purchases of mortgage-backed securities. All of a sudden, low interest rates were a nice thing, but the reality of withdrawal of the historically extraordinary support the Fed has given the U.S. economy over the past year set in, and the last hour or so of trading was all sell sell sell. By the time the smoke had cleared at 4pm on Wall Street, the DJIA had plunged 169 points in an hour from its high of 9917, closing the day at 9748 for the first abrupt late-day sell reversal we've seen in the market in quite some time.

I said it before and I'll say it again -- I think this market's been itching to go to Dow 10,000 for many months, but I don't feel right now like investors' still-scarred psyches can handle a sustained push into five digits on the world's most-watched blue-chip index. I would not be remotely surprised if this is as high as the market gets for some time now, and that over the next little while we could very well be heading lower and not higher for the first time in six months. Although I still think it's quite clear that the economy is nowhere near as bad as the worst pessimists out there had been fearing now a year after the global financial implosion, it's also equally clear that things are nowhere remotely close to getting back where they were a year or two ago either. 3.5 million incremental jobs have been lost in the last year just in the U.S. alone, and entire pockets of businesses, mostly related to securitization, mortgages, and loan repurchasing, have entirely disappeared, perhaps forever. To suggest that the market can or should keep running up from here back to the old highs is, at least to this market-weary investor, not in keeping with reality. And always staying in touch with reality is one of my basic precepts to smart investing.

So I'm out there looking for put options today on some bad companies whose stocks have rallied hugely with the general flow over the past six months. I really love the stocks I've picked up at ridiculous firesale prices over the past year, even at today's fluffed-up prices after a 60% rally in half a year, but there's no reason for me to sit just idly by and watch my portfolio slough off 20% of its value during a correction that I have felt very confident was coming at more or less exactly the point that the market reversed at yesterday afternoon.

To me, today is another one of those days like when I was out here talking about UYG at $1.50 back in March ($6.33 yesterday afternoon):

It's time to put my money where my mouth is.

What's Up With the Market?

I probably get about three or four emails or girly chats a week from people asking me what I think about the stock market these days. Everywhere I go there is somebody who has talked the market with me before, and I'm constantly getting asked for my thoughts. Last year as things crumbled to the ground, of course, this was an extremely hot topic, and frankly I made most of my thoughts known here as far as wanting to buy in when stocks got as low as they did. Well, now as the market has just rallied stronger than anybody could have ever believed over the past few months -- up around 45% from the March lows on the S&P 500 -- the interest level seems to be rising once again, as more and more people become dismayed with the degree of this latest surge after last year's tumultuous tumble.

The most common thing I hear, to be perfectly honest, is "When do you think the rally will crumble?" In fact, probably at least half of the people I talk to regularly about the stock market seem to believe that this latest rally is way overdone, and that people are just being silly to be pushing up stock prices this much, this fast, they're creating another bubble, yadda yadda yadda. The general consensus seems to be that those who are buying into this particular rally are surely destined to get their comeuppance soon enough in the form of a vicious bear market to eradicate most or all of their gains all based on bubble valuations and blind-eye gains.

Well, I'm here to tell you that I don't agree. At least not yet. There are a lot of reasons why.

First and foremost, Dow 9,200 is not ridiculously high. It's just not. Although ultimately one can always classify this statement as just an opinion, it's really not something that people who truly understand the market and historical valuations would ever disagree with. I don't care how low the market went late last year, again in January, and finally again in March earlier this year, but with where stock prices had been trading as recently as a couple, few years ago, when I look at Dow 9,200 -- and especially when I look at the individual stock prices that go into creating a level of 9200 for the 30 DJIA stocks -- I don't see a bunch of overinflated, fluffy stocks with plenty of room to sell them down hard. At Dow 14,000 two years ago, maybe. But at Dow 9,200, stocks are still probably closer to looking cheap than to looking expensive.

Now don't take that last statement too far -- I don't really mean to be saying that I'm some kind of huge bull on the short-term of the U.S. stock markets here at Dow 9,200. But I'm definitely not in the camp of those who scoff every day when the market is up again these days -- and I know there are literally millions of you out there -- thinking how speculatively-valued all the big stocks in the market are becoming again. To put it another way -- and anybody who knows me and chatted with me regularly over the past several months heard it from me live when it was happening -- but it was Dow 6,547 back on March 9, 2009 that I thought looked truly silly. I mean, that's the shit that was stupid, not Dow 9,200. And I'm someone who's followed the market like a hawk for almost 25 years at this point, since back when the Dow was in the 1000's, so there's more than a little perspective behind that statement. That's why I was right here, for example, on March 13, extolling the virtues of buying the Proshares 2x-leveraged Long Financials ETF which trades under the stock symbol UYG, which had touched $1.37 a share a couple of days earlier (as I type this, UYG is up around 330% since that price) -- because everywhere I looked back at Dow 6,500, all I saw were obvious buys. Absolute, raging, screaming buys. GE was at friggin $6.60 for crying out loud (Warren Buffet bought $5 billion of preferred stock earlier with the GE common trading at around $21 a share), Amazon was below $40, Apple was below $80, oil stocks were cheap, gold was cheap, everything was effing cheap as hell.

Despite where we were just five short months ago now, try as I might I just cannot see stock prices today as looking particularly expensive. With the Dow already having rallied back from 6,500 to 9,200, I therefore do not agree with the growing consensus that things have moved too far and we cannot go much higher. In fact, for many reasons I would guess at this point that it's a pretty good bet that we will rally a bit more from here. For starters, the economy clearly has bottomed. A couple of months ago at this point. Sure, the employment situation is still downright frightening right now in the U.S., but employment is always a lagging indicator, and all the other figures show that things fell off a cliff late in 2008, stayed that way in the first quarter of 2009, but in the second quarter -- which ended on June 30 -- the rate of decline in the national GDP slowed to just over 1%. And things don't seem any worse right now here in early August than they did over the past few months -- if anything, the beginning of Q2 (April) was probably still feeling some residual slowness after the March stock market lows, while Q3 is likely to begin at around the same pace as the improved growth from the final months of Q2 and stronger than the previous quarter started, so Q3 GDP can hopefully be another positive sign to look forward to.

Moreover, those jobs figures are likely to begin improving any month now, if you assume for example that the "bottom" for the economy was the same as with the stock market and just call it March of this year. That leaves April, May, June, July and now into August that employers have had to figure out that the economy is currently in bounceback mode and start adjusting up hiring or at least adjusting down the firing. That means that this week, when the July jobs number comes out, we will get our first look at how employers acted with now four full months of data on the economic rebound in order to plan their hiring strategies. If the July numbers are not better than expected -- and sadly I am talking about a month with under 300,000 jobs lost or so -- then the August and September numbers are very likely to be positive surprises. And the fact that we probably have another couple of months of positive reports in some significant economic figures coming right down the pike is only going to help bolster the whole recovery theme further. And keep in mind all that "stimulus" spending that Barack Obama and the Congress pushed through earlier this year, which represents hundreds of millions of dollars a year of "synthetic", mint-financed spending which will no doubt also have a measurable effect on the economy as a whole, both directly and indirectly, for a long time to come.

On top of the economic influence on the markets, psychology probably plays at least an equally important factor, and again I think the psychology of the market right now is such that we are still -- at the moment of writing this at least -- in rally mode. For starters, it has been a common technical indicator over time that in a bounceback from a sharp rally or a sharp selloff, it is common for a major index to retrace close to 50% of its overall previous change as it adjusts to the new changed level. For example, in this case the Dow fell from 14,100 in October 2007 to 6,600 in March 2009. An exact 50% retracement of that often dizzying 7,500-point drop would bring the Dow back up to 10,300. That leaves around another 12-13% to go still from current prices. Similarly, the S&P 500 closed at 676 and change on March 9 of this year, after having closed as high as 1,565 on October 9, 2007. A 50% retracement there would bring the S&P 500 back up to 1120, while the index currently sits only at 987. That leaves another 13% there as well to rise, if the markets are to follow the common practice of recovering half of the losses before the next leg staying in the bottom half of the recent trading range.

One other factor I just can't keep coming back to is Dow 10,000. I know it's only psychology, but I'm telling you, things like the Dow crossing back over the 10k mark have a very meaningful effect on a huge swath of investors' mindsets, both in this country, and among foreign investors in U.S. markets, where things like superstition, lucky numbers, etc. are at least as popular as they are in America. And in this case, I simply cannot envision Dow 10,000 again without an accompanying selloff in stock prices. I just can't picture it any other way in my mind, much as I would like to. I think we could easily rally up to or near 10,000 on the Dow -- which would be roughly consistent with that 50% retracement rule that often applies after big inflection points in the market's history -- and then experience quite a bit of pushback from individuals and institutions following the "won't get burned again" mentality once the Dow claws its way back up to five figures. But part of believing that a retest of the 10,000 will likely fail, at least at first, is believing that the Dow could find its way back up to that point to begin with. The psychology of the market is such that it may want to see a re-test, and may subtly make it happen by rallying things up to that point. It has often been a quick and easy push for the last several percent on the way to a significant re-test at a major high- or low-water mark in the major indices, something that's been happening in the stock market since time immemorial. I've seen it happen a thousand times before, and I'll see it a thousand times again. This is just how the market works sometimes, as any market pro knows.

Healthcare has been sufficiently whittled down from the ridiculous overspending that is becoming this president's main theme so far. The bank bailouts -- unpalatable on every level as they are -- appear to have worked, in that the mainstays of the industry have been kept afloat, crisis averted. The economy bottomed months ago, and all signs point to unemployment moderating in coming months as employers realize that the sky, indeed, is not falling as many had predicted. So far the long-term fallout from the financial meltdown has been, while quite significant, not the catastrophic event for all of America that many had feared just a few months ago. And Dow 9,200 is just not that expensive, not on any scale used by normal human beings. There is room to grow a bit more from here, and a 10-15% rally is never anything to sneeze at. I'm still looking to buy whenever a particular sector or stock I like gets cheap, having rotated into some oil stocks a couple of months ago when crude prices fell to $40 a barrel, and I will continue to do so at it seems appropriate given the current market action. But as we get above the 9,500 level or so on the Dow, I will be starting to look for some stocks that are approaching long-term technical tops on their charts, and/or shares in companies that appear to be running into growth problems or funding issues for whatever reason. Those are the places I will want to be buying some put options to hopefully profit from everyone else selling off when the Dow gets close to the key 10,000 mark.