PROSHARES TR (SKF)

Five point pull-back, and really nothing has changed: nobody really knows who is in deep-enough trouble to go under, and the people with any capital to spare are not lending.

In fact, there seems to be some cut-throat shorting to speed rivals' demise.

Sadly, I think fools are rushing in way, way too early, trying to make a killing in financials. That explains the 5% dive today, and an entry point.

I note that Ben was on Capital Hill yesterday talking the markets down, I believe in order to helpfully precipitate a bottom. I believe Ben is hoping to shake out the doubtfuls sooner rather than later, which is bullish for this EFT.

This EFT actually rises quite quickly on bad news. So this pick is a simple bet that we are not out of the woods, and we are likely to see more, and more dramatic, bad news. Nothing, including Ben's recent remarks, is anything like an all-clear for the financials, so this dive is shear crazy, unless someone is loading up to short big??? Need I mention that that would be very good for SKF...

What really scares me is the macro environment: we are recklessly socializing the losses, which begs the question of how much the public treasury can afford to spend without putting the dollar's stability in doubt?

Given the gravity of the situation, and the urgency for quick fixes, and the complexity of the threats, I rather think these recent maneuvers are more likely to be eroding the stability of the dollar over the long run, either by deflation or inflation, than to be addressing any "real" problem. Thus purely cogitating on the relative chances that these big moves are barely more than a desperate shot in the dark, I conclude the long term prospects are dire for this sector. (Short run fixes are rarely optimal)

What puts the final nail in it for me is that I think Ben believes it is a very good thing for the Fed Chair to signal the markets about probable turns. Yesterday he clearly signaled a dire and dangerous outlook. His word has been the gold standard...

More fundamentally, I think recent monetary and fiscal actions naturally compel a huge pile of wealth to evaporate, and that is what investors in the financials don't get. This is all about making a trillion dollars evaporate without damaging the underlying system. I think SKF is as good a proxy for ground zero for that process that I can think of.

Finally, I want to make clear my dismay that the fixes emanating from Washington are fatally ideological: we could solve the mortgage crisis and spend a mere fraction of what we will burn up saving the majors, Except that there is a strong inclination to keep the suckers in the sucker category, and the to help the "winners" stay on top.

What is the alternative? Government purchases of defaulted real estate, in a bottom up strategy that keeps people in homes, preserves neighborhoods, and does not liquidate the national treasury to save white collar criminals. I think it is fiscally prudent as well, because the real estate has value going forward which can be liquidated when the smoke clears. Socialize the assets, not the sleaze....