LiveBlogging the firestorm rally

4:02 pm EST: Move along, nothing to see here. And let me be the 832nd person to point out that the rally was led by the most heavily shorted sectors—financials, retailers and homies— along with a couple of heavily smacked momentum favorites, RIMM and CME. AAPL to come, and it better not have a worm in it.

3:37 pm EST: Kevin Depew, on Minyanville.com, cuts, as he does so often to the chase:

FITB said that the impact of the Fed’s rate cut is muted because the bank hedges its income for changes in rates, and so the effectiveness of the rate cut depends on whether [it spurs] economic activity in our customer base. Yet...FITB has actively sought to diminish the impact of the deteriorating credit environment by exercising most disciplined underwriting standards.

Follow that? Let’s clarify. The Fed is trying to stimulate credit growth while banks are trying to protect themselves by actively reducing it.

Which goes to the point here, and elsewhere, that liquidity is not the issue. The issue is solvency.

3:20 pm EST: BREAKING NEWS Abby Joseph Cohen is BULLISH, based on long-term stock market appreciation, while conceding that interest rates will likely rise as the economy picks up before the end of the year. Still calling for a 10 percent gain in S&P although it’s not clear whether that’s from Dec. 31, or from here.

1:24 pm EST: Somebody will start throwing around the R word (resilient) soon. Past performance and all that but this latest ramp may be coming a little early for it to hold into the close. I’ve still done nothing and now have to disappear for a little while to take care of a pressing assignment. Three observations:

• The usual suspects are still talking about a liquidity problem, which is curious considering the cash tossed so willingly at financial services basket cases.
• The JPY remains the tell; it seems to have backed off about 1 percent today although the FXY is not off that much.
• And on the everything-is-correlated front, gold just sneaked up $11, back over $8.90, after being down almost that much earlier.

1:08 pm EST: Apropos of nothing at all, Bayou conspirator James E. Marquez was today sentenced to 51 months in jail for his role in the fraud; the sentence was at the bottom end of the 51-60 month range sought by the government.  So that’s one slippery slimy self-dealing creep off the street for a while: only another 15 or 20,000 to go.

12:49 pm EST: Apropos of nothing at all, Bayou conspirator James E. Marquez was today sentenced to 51 months in jail for his role in the fraud; the sentence was at the bottom end of the 51-60 month range sought by the government.  So that’s one slippery slimy self-dealing creep off the street for a while: only another 15 or 20,000 to go.

11:52 am EST: “White House has ‘Absolute Confidence’ in Bernanke”...pack yer bags, Ben. Theoretically, of course, the White House can’t fire Fred Reserve, but this White House has quite a record for doing things well beyond its theoretical powers.

11:38 am EST: Capitulation 5, Resilient 0.

11:35 am EST: It’s looking like just another of those days that we’ve seen so often in recent months. A raucous 400 point rally off the bottom—Buy financials! Buy retailers! Buy homebuilders!
—but it’s being sold. Kudlow wants taxes cut to zero: therezzashock. Still just watching (insert Yogi-ism here).

10:22 am EST: IYT (DJ Transportation ETF) is crawling back to the flat-line but, guess what, Fidelity has none available to short. SMN now up 6.6 percent ($3.30) but had traded up to $57.00 vs Friday close at $51 and the $54 open. Conference call coming through in a few minutes so I’ll be sitting on my hands. Back in a few.

10:05 am EST: The addicts are already demanding another fix, looking for another 50 bps on Jan. 31. They bought ’em back again, taking the Dow 200 points off its low; now they’ve sold ’em again, down 325. If I was a bull, I’d be a bit concerned that a lot of powder just burned off.

9:38 am EST: Dow off 440 or thereabouts. David S. Products proffers:

You might include the 'theoretical' use of the
f-bomb in the Fed statement: "The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully." (Translation: F*ck inflation)

9:29 am EST: Capitulation 3, Resilient 0. OK, you buy ’em with your money.

9:19 am EST:  Oh, and I wish I’d been smart enough to bail on my hedges

9:04 am EST: Looking at my own book, I’ve got two trades that I want to get down. Buy SMN (the double inverse basic materials ProShares) and double-down on my short IYT position; I won’t be doing either of those on the open. I may also cover some shorts, depending on how the day progresses. They’re selling the rate cut...quelle surpris. Dow futures now down almost 500 points again.

8:58 am EST: I wonder if Toby from Citigrope now has the analytical basis for cutting his 1675 target for the S&P 500. Come to think of it, I wonder if he still has a job?

8:48 am EST: Two words I would have expected to hear are mising in action. Capitulation. Resilient. So far.

8:45 am EST: BAC laid an egg. That helped.

8:38 am EST: Shocking (sarcasm). Nobody’s mentioning that it’s a solvency problem, not a liquidity problem. Speaking of which, Reuters reported late Friday that Dubai Holding LLC, owned by the Emir of Dubai, has acquired more than half of the publicly-traded shares of New York-based hedge fund Och-Ziff Capital Management.

8:20 am EST: Fred Reserve announces 75 bp snip to both target and discount window rates; now at 3.50 and 4.00 respectively. Dow futures reverse about 100 pts in an eye-blink, then another 100. Now down just over 300 pts; Nazz, which had been down more than 100, now down 40.

8:00 am EST: Paulson, not in Davos, is speaking. Dow futures are off around 550, a little worse than when it surfaced around 6:30, but, it should be noted, not far from where they were indicated about the same time yesterday. The Paulson blather in full.

Comments

[Todd K. Bolus]

Funny stuff, aptly descriptive. Nice work!