The first market downturn came to 7822 by 2 p.m. and allowed our traders with open or new buy April 320Puts to sell to 7.40, good profits to start the week. We had not recommended calls for yesterdays' trading, and will continue to not do so, despite the struggle for upside as the market closed. We must remember that earnings will soon be out and will be dismal, and that a healthy consolidation allows market makers profits to move on to new buys. The market does not do well just going up. Or just going down. To breathe, we want to see the market move bi-directionally, following true supply and demand.
There is possibility of a bit more healthy downside, and reactions throughout earnings that will keep the market relatively UP, for the moment.
A bit of history on why our banks are in trouble, from a small business perspective:
As a business consultant that specialize in restructuring and often works with banks for family business I've spent my career negotiating between banks and entrepreneurs to develop lines of credit, redo bank covenants, and write business plans. I've always been amused. It's been lucrative for my consulting business and in light of recent financial issues I thought I would share my own assessment of banking in the last 10 years. Note there...banks love to have the business have a consultant, and banks were great customers.
1. All bankers are idiots. I've never met a single banker calling on a family business that I've worked with that was anything more than a "glad hander."
2. Most loans are moved to a loan officer at the bank, a number cruncher that dutifully reviews the false financials the family business or CPA working for them passes over. My favorite of these is "budget projections." These are further examples of bankers as idiots, as they are the inside guys for the above #1, leading to the "suits" above them that decide policy, and make the banks investments.
3. Banks do not care if you succeed, only that they get paid.
4. When things get tough, for any reason, banks become much less friendly, unless they have your personal guarantee. This makes sense in pure business, yet risk was taken in far more aggressive areas in the past few years that actually stopped business expansion,as only housing and the financial sector benefited, most with "fake money moving to other fake money", as we have now learned.
So, I renewed a contract with Citibank (C) last week for potential review of bankrupting family businesses, and in the application process that added to my proposal they had a great question:
"What are your business values?" ( I truly love this question, as if they truly believe what you say). I dutifully answered this ridiculous question in the right way, "Capitalist Pig-Wealth to the Few"
No one said a thing, and my consulting company was listed as a bank restructuring firm to be utilized. :) By the way, my firm has done great business with this firm in the bank, along with Bank of America.
These are all goats in their own rodeo, traders, and the future cannot be in their hands.
What can we learn from this?
Lastly, a comment. Floyd believes the banking disaster is only beginning to be uncovered, the fraud so viral that no one knew the truth, and that we will have to, in the end, most likely DOUBLE our initial debt. This will be a necessary and sadly right thing to do.
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