Markets understanding what they asked for!

Market runs another 400-500 pts to the downside as they are showing their little tantrums that now they don't like the way the government is nationalizing both the risk and reward side of the free markets.

With Hank Paulson's announcement that the Treasury would not be demanding an equity stake in financial institutions that they bail out, the market is now seeing the the old adage:

"Be careful what you wish for..."

In this case, it is more like, "Be careful what you lobby for..."

With the socialization of risk, I told you in "Fed Buying up Banks" that once the risk was nationalized, the government, in order protect the poor taxpayer, would want to start taking up some of the profit or reward side. Well, the markets are just now beginning to understand what Paulson and his crew (Dept of Treasury or Goldman Sachs DC office, as I like to call it) are about to do.

It will take many years if at all to untangle the government's intervention into the financial markets, and with the BHO presidency only 4 months away (Jan 20, 2009) and with a Democratic Congress, that entanglement may never go away. The markets are just beginning to understand what they cried "wolf" for and what's it is going to get them.

The Republicans started this under the guise of saving the financial markets, but the Democrats are going to keep it to ensure "that this never happens again." That, my friend, is how socialism quietly walks through the door. Like a "Nas Veratue" or for those not versed in horror films: the living dead, you must ask the Vampire to come into your house since he/she is not allowed to enter unwelcomed. They have weird union rules, I guess.

Anyway, socialism will come to the USA (now the USSA) now by armed revolution, but by the smile and helping hand of the government there to help the many people whose 401K, IRAs, and jobs are on the line. The government gives with one hand and takes with the other.