Monday, February 9, 2009

Cash In That Ticket

If you bought a few lottery tickets (bank stocks) a few days ago I would rush to cash them in before the bank goes bust. If you bought some of the more beaten down names such as Bank Of America and Wells Fargo - you probably pulled between 30 to 50%. Let's not get greedy. I think the market is trading the exact opposite as I had hoped for and may be telegraphing some tough love in the days and weeks to come.

The rumor stream has been a consistently slow bleed of various plans coming out of the Treasury and out of the Congress. By all measures the market is trading in a "buy the rumor sell the news scenario". This morning a pretty heavy hitter weighed in on the mark-to-market accounting rumor swirling around.

Feb. 9 (Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the financial industry shouldn’t abandon the “mark-to-market” accounting rules that some banks blame for aggravating global economic woes.

The rules, which require banks to book profits or losses when asset values rise or fall, should be even more rigorous, Blankfein wrote in an op-ed piece published yesterday on the Financial Times’s Web site. New York-based Goldman’s adherence to the practice “was a key contributor to our decision to reduce risk relatively early” in the credit crisis, he wrote.

“This process can be difficult, and sometimes painful, but I believe it is a discipline that should define financial institutions,” wrote Blankfein, 54. “If more institutions had properly valued their positions and commitments at the outset, they would have been in a much better position to reduce their exposures.”

It's anyones guess as to which direction the Treasury will follow, but one thing is for certain the market is primed to be disappointed if they don't deliver ALL of the line items and rumors many on the Street were hoping for.

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