Some pig! And a leveraged play on bad banks
Today's Financial News - Posted February 3, 2009
As Washington prepares to set historical records in pork-barrel spending, Andrew Snyder has created a straddle that plays bad bank hype against market reality!
by J. Christoph Amberger
Baltimore—TFN: The German town of Heidelberg counts among its sights worth seeing the Heidelberger Faß. By modern American standards, it’s not much of an attraction… merely a giant wooden wine barrel. It holds 58,100 gallons and was built in 1751. And it still tempts half a million people every year to drive up in coach buses and gawk at it.
Some barrel.
Historical accounts state that the wine it contained was almost undrinkable: Filling it required blending all kinds of local wines. The “blend” resulted in the same vile swill they now sell in liter-cartons at German supermarkets under such quaint names as “Vintner’s Droplet”.
These days, House and Senate are tightening the hoops on the monstrosity’s financial counterpart. Forget pork barrel spending… think Heidelberg-size industrial vats! And the content is just as unpalatable.
As the beautiful S.E. Cupp put it today: “It is the porkiest of pork. It is a grizzled, dripping-wet, sizzling pile of pork chops, wrapped in ham, sprinkled with bacon bits. It is, as Charlotte herself would have put it succinctly, ‘Some Pig’.”
Having watched the Bush Administration abandon free market principles during their last year in power, I was surprised—if not shocked—to see Republicans stand up for principle against a House majority. I expect far less backbone from Republican senators—the temptation to let yourself drift with the current is just too strong… even if you know that you’re heading for a waterfall.
But the world’s turned upside down. You know it when you hear the U.S. government preach socialism and the French and Russians embrace a free economy: You probably laughed out loud when you heard Vladimir Putin at the World Economic Forum in Davos, warning that too much government involvement in the economy could be “dangerous.” And he cautioned against “blind faith in the state’s omnipotence.”
And just a day later, the media reported that French Prime Minister François Fillon has rejected demands that the French government “stimulate” consumer spending, rather than follow his plan to encourage corporate and infrastructure investment.
That’s almost as ironic as watching one Democrat cabinet nominee after the other falter due to failure to pay taxes. The party who has institutionalized class envy by promising to steal from the evil rich to give a free ride to those making$10k less apparently has very flexible definitions of what constitutes “rich”.
Some tax cheats!
Maybe a quick fix of government finances could be achieved by auditing House an Senate majority members’ tax returns for the past ten years. Who knows, liberal stalwarts might even feel the need to amend their political platforms once they actually start paying their fair share…
*** One of the best ways Washington can appear pro-active in combating the financial crisis is by advertising the creation of a so-called “bad bank”—a kind of Resolution Trust Company on steriods (for those of you who still remember the early 1990’s).
It would let the nation’s lenders clear some expensive obligations off their balance sheets and get back to their original business. Lending. At least that’s what they want us to think. “In reality, this pseudo bank will skew the free-market-created valuations of just about every other banking asset,” writes TFN’s Andrew Snyder.
Last week, the market surged on rumors that the Obama administration was close to revealing its plans for a bad debt repository. This week, it gave back all of the gains, plus a few percentage points more, on news that the rumors were nothing more than Washington trying to gauge the market’s reaction.
Consequently, the share prices of the nation’s largest banks are moving like a yo-yo. This market remains extremely volatile. “If Obama is unable to convince Americans his team has magic beans, there is a high probability the markets will drop significantly further before the economy heals,” says Mr. Snyder.
Of course, Obama has a solid track record selling Americans magic beans…
Andrew has developed a simple strategy to leverage this volatility: He’ going long one particularly depressed bank stock… while buying “insurance” by shorting one index fund. Given the market’s violent wave patterns, chances are that he can make you money on either!
He’ll be releasing his recommendation Thursday morning, to our HSC premium service members. Are you one of them? Find out here!
Next Article: An up and coming biotech: Human Genome Sciences Inc. (HGSI)
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