The US Government is out of control. Banning Short Sales of 799 Financials for 10 days (over qtr end funny enough) is another act of desparation. The unwinding of trillions of OTC CDS contracts is causing massive balance sheet distortions. Insurance companies thought they had is not necessarily there-hence forcing asset right downs. What a CON JOB.
The reflation trade is taking place. Printing money to buy garbage assets-bailing out banks and bank execs. With no shorting of financials, it gives the remaining executives a chance to unload their shares before they get the Bear Stearns and Lehman treatment. Gold is going to soar after the Exchange Stabilization Fund has shot its last bullet.
The US Government finally acknowledged the existance of the ESF as it will lend 50 bln to insure money market funds. The LIBOR rate has yet to drop below 3%. That is key as it should trade 20-30 bps over funds. It has been trading around 2.80 over the last 2 weeks, so things are still uncertain in financial circles.
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