Socialization of Risk & BHO Presidency

As the FOMC cuts short term interest rates (STIR) by 50bp (0.5%; 1% = 100 basis point) the markets rallied over 80pts, but as soon as the euphoria was cleared, the sellers (buyers in a panic mode) came in a sold into this rally. IT is the funds that are doing this selling since the volume is way too high for individual investors to make.

Why are the funds selling? They are trying to get cash (liquid) to cover the redemptions that are coming today. It is the day that most people open their 401K and IRA statements for September and they are going to call their brokers and SELL SELL SELL!

This is help put a final bottom into the markets either this week or next as I as predicted in earlier posts. (See "Where are the markets headed" in which I said we would find a bottom around 950 in the S&P - WOW, the markets are near 963-970 now).

This financial crisis puts a nail in the coffin of what was Senator McCain's Presidential campaign, and all but ensures the election of the most liberal Democrat in the Senate: BHO (Obama). With his election, the free markets will never be the same, and we will take the first big steps towards complete socialization since it appears "the free markets can't regulate themselves." And you know what? The US citizenry will go right along with that assertion to their new government format: SOCIALISM!

With the assumption of risk by the US Government, the bad behavior will not change since if you were given the situation where you could keep all your profits, but deflect your losses (risk) to the US taxpayer, would you change to become more risk-adverse?

Hell NO! You would do everything you could (just like the S&L Crisis in 1980 when they lifted the risk/reserve ratios on S&L's) to take on risky loans since the government is going to bail you out.

When this becomes known, the Government will step in and nationalize (for the good of the taxpayer) the financial markets to prevent the behavior that they spawned. Pretty cool move, eh?

Take the USA socialistic by "protecting the taxpayer", but it will happen. Watch for the need to add more to the $700 Billion USD bail-out as all the toxic paper starts to hit the streets as the Treasury agents begin buying it up.

And don't forget about the CDS (credit default swaps)! They are just beginning to unravel and they could swamp the $700 Billion fund.