Sunday night update:  The dollar is up, bonds are up,  equity futures are down.

Timothy Geitner declared to the press circuit that he cannot say whether more bailout money will be needed.  Well, Mr. Geitner, that’s a vague way of saying that much much more money is needed.  The question is what process are you going to use to secure more funds?  Trying to get EVEN MORE bailout money passed through the mumbo jumbo soundbites that congressional hearings have turned into might not be a real popular way to go about it.  The business journalists that are covering this whole mess might really start to scratch  their heads and wonder.  You at least need to keep the press circuit on your side.

So, though you may not be able to get more bailout funds passed through the circus of congressional hearings and political double entendres, there is another very obvious way to fire up the printing presses and ease credit.  You already announced the plan.  You’ll buy back $300 billion worth of treasuries.  Though the bond market witnessed an initial jolt, no one seems to be taking this treasury buyback plan very serious.

To achieve it’s goal and ease credit more, the Fed has no choice but to drive bond prices higher.  Remember, markets don’t move, they are moved.  The Fed has a rather large set of tools to aid them in moving things where they need them moved.  I would not recommend taking the other side of their trade.  The old saying “don’t fight the Fed” is going to have a whole new meaning when you see the short squeeze they can orchestrate.

With this in mind, it is my opinion that we may be in front of an extreme outlier move higher in the bond market.  And when viewed through the eyes of Mr. Volatility, this is nothing but an opportunity.

I wrote in my March 9th post that at some point this year, the bond is going to be a massive short.  I have not veered from this opinion.  However, it is not a short yet.  It can go way way higher and very quickly.  Right now, it is the best tool that the Fed has to ease monetary policy.  I continue to hold calls in bond futures.  I believe the bond will ultimately be a huge short.  But that is not today’s business.  Today’s business is that the fed announced they are going to systematically buy back treasuries and calls in treasuries remain extremely cheap.

Peace

This is, in essence, the entire story of the stock market, as I have found it. Like the South Sea Bubble, the great tulip trading mania in Holland, the Ponzi swindles, and the chain letters of the depression, it is kept in motion by one thing–faith. Sometimes the chain is broken, confidence lost, the whole house of cards comes tumbling down, and we have another Wall Street crash. Then it starts all over again.
-Nicolas Darvas
Wall Street: The Other Las Vegas

A relatively quiet day on Wall Street today as the dollar rose so equities sank.

Someone mentioned that there was a meeting amongst bankers today. Of course, more important than the meeting was the press circuit. Special emphasis was likely placed on make up and less expensive clothing. After all - this bonus scandal is a bit hot right now. Best not to wear the $10,000 suits around for a while.

Supposedly, one of these guys that runs one of these banks (hint : $BAC) declared over the television that at the meeting everyone decided that “we are all in this together”.

Now that, my friends, is the epitome of irony. YOU’VE been in this together for a long long time. Unfortunately, what YOU were in on (excessive use of leverage and negligent risk management) is what brought US here. Now YOU are declaring WE are all in this together. Unfortunately most of US aren’t running around with multimillion dollar bonuses in our bank accounts. Now WE are all in it together. Why ? Because of the losses that YOU racked up through deplorable risk management and excessive leverage. Now, all of this has to be paid for by US.

And that just isn’t right. Is it?

Peace

Now I see this clearly. My whole life is pointed in one direction. There never has been a choice for me.
-Travis Bickle
Taxi Driver

I’d like to make a couple things clear about my plans for this evening.

1) The rumors that are spreading that I am going to be in San Francisco this evening may or may not be true. If I am there, I’ll be talking the markets, of course. It could be likely that I would wear a Tinker Factory T shirt. If you do see me in that shirt, it is the exact shirt I wore in the 1996 reunion tour of my Glam Band, Volaterra.

If you’d like to interact, please make yourself known by wearing one of my familiar logos.

2) If I am in San Francisco, the first thing I’ll do is hitch a ride out to Alcatraz for a swim back. Sometimes I swim Alcatraz. Just because.

Peace

Jack LaLanne Swims from Alcatraz Island to Fisherman's Wharf, handcuffed, shackled and towing a 1,000-pound boat

1) US stocks ripped higher today. I can already hear televisions across the nation talking about how great this all is. They are probably saying things like “WOW, look at GE, it went up!….That must mean the economy is strong.”

Tune them out. Tune me in. Allow me to explain, the cycle and the spin.

First, allow me to define, what is known as “The Oldest Trick in the Book“.

The Oldest Trick in the Book is the infamous “Tapping on a person’s left shoulder when you’re standing on their right.” This trick was first chronicled in cuneiform by the Ancient Sumerians, who lived on the windswept steppes of Mesopotamia.

And today in the market, The oldest Trick continues as US stocks rallied immensely (that’s the tap on the left shoulder), while the dollar fell (that’s whats standing to your right). As stated back here in December, it is gold that will ultimately benefit from all this.

2) My collaborators at The Tinker Factory and I were cruising back from Geneva earlier today. While homeward bound on The Errol Flynn, we discussed how to position for the next move lower in the REITs. I am well positioned for now, though I am itching to add a few more puts. I’ll check in with the prices of various strikes tomorrow to see if I should add more.

3) I mentioned my jet, the Errol Flynn. You can spot Errol by looking at the tail. One of my images is usually on the tail. Sometimes, there is no image anywhere. In those instances, I may or may not be trying to pull off a covert mission.

Peace

In my time, which is now, I sometimes ponder

Of all the trades that I have done, Which one is the best?

Without a doubt, I know, that my best trade

Is my next trade

Peace