The Breakup: Drama from Obama
Today's Financial News - Posted February 23, 2009
Wall Street is looking more and more like a soap opera. People are getting arrested. Congress has amnesia. And a big breakup is just around the corner. Even though it is like high school all over again, there is at least one move that will put some money back in your pocket.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): A good friend of mine used to date a girl that was a total nut. She loved money and it just so happened my friend had lots of the stuff. It was nothing for them to head to New York City for a weekend and come home with a BMW load of shopping bags.
When my friend and the girl suddenly parted ways, I said to my buddy, “What’s up? That girl was hot.”
His answer never really made sense until the last few weeks.
He said, “That girl was nuts. The more I bought her, the more she wanted. I could not afford her.”
That was the first time I ever heard my friend even remotely complain about the cost of something. Immediately, I knew something was up.
What happened was he made the mistake of presenter her with a piece of jewelry on their second and third dates. Come date number four, when he showed up empty handed, they spent the majority of the night shopping for gold necklaces.
The more he bought, the deeper he dug the hole. He was going broke and miserable.
Finally, with no end in sight, he ditched her.
It was an inevitable move.
Dear John…
Sadly, it is all too similar of a story to the woes of our nation’s economy. The more Washington bails us out, the deeper our addiction. It will not be long until somebody says goodbye and the other half is left standing on the corner in tears.
Unfortunately, the Obama administration and Wall Street have already had their first big fight.
Need proof of the domestic upheaval? Just look at last week’s action. The Dow dropped 6% on the notion Obama could be nationalizing much of the banking sector.
Of course, one party denies it and the other says, “She says, he said, they heard you were buying the banks.” Who knows what the truth actually is.
Today’s rumors have Washington grabbing a 40% equity stake in Citigroup (NYSE:C). To Wall Street, grabbing shares of preferred stock was one thing, maybe the relationship equivalent of guy’s night out on a fifth anniversary. But buying a ton of common stock is like going out to lunch with an old girlfriend.
Wall Street is not happy.
The day started positive, but once folks realized what is really going on, the major indices all turned deeply red. As I write, the Nasdaq is down over 2%, while the S&P 500 and the Dow are only slightly better with drops of 1.5%.
Washington is just about out of jewelry to hand to Wall Street.
It is time to slip a ring on somebody’s finger (which has got to mean full-fledged socialism) or get the heck out of this mess. Either way, it is going to be ugly. I cannot imagine Congress’ bridesmaid dresses.
If you followed my trading advice last week, you shorted the overall market, either through S&P 500 puts or by shorting the Dow through an ETF like the Short Dow 30 Proshares (NYSE:DOG). Either way, you are sitting on hefty profits.
My advice for this week is don’t cash in the gains just yet. This breakup is far from over.
Next Article: The American thing to do is buy Chinese solar companies
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