German Judiciary Renders Euro Reprieve

Reports of the euro's death are greatly exaggerated, at least for another month.  Germany's constitutional court gave its government a retroactive green light to bail out insolvent European governments.  It meekly called for legislative consultations in future bailouts, but in the increasingly elite-driven Western world that admonishment can safely be regarded as moot. 

Western political leaders can rest assured that threats of "tanks in the streets" (whether from officials like Hank Paulson or this new research report from UBS) will work wonders in forcing bailouts into action.  How the West's leaders gathered around saving the euro isn't clear.  Germany's Merkel was wavering in her support for more eurozone bailouts as recently as August.  Perhaps Rothschild's recent backing of SocGen was the signal that the old European noble houses were not about to let this grand experiment in Continental unity go down the drain.  At any rate, the Swiss bank's devaluation of its franc yesterday confirmed the unanimity of elite opinion on the matter of saving the euro. 

This is not by any means a signal to go long the euro.  Bailouts have a funny way of masking troubles that later reappear despite all good intentions at hiding them.  Insolvency can't hide forever. 

Home Prices Drop; Will the Market Notice Today?

Good news for home buyers who are still on the fence (pun intended)! Home prices keep dropping:

Home prices fell at the fastest annual rate ever in the first quarter, but the pace of month-to-month declines continues to slow, a closely watched housing index showed Tuesday.

The Standard & Poor's/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter, the most in its 21-year history.

Home prices still haven't touched bottom. Watch how this sinks bank stocks in Q3 as losses on more foreclosures destroy their stress-tested capital cushions. No doubt the Plunge Protection Team will be alarmed at this death knell for the bear market rally.

I'm short SPY, building cash for a real estate purchase in 2010.

The Haiku of Finance for 02/12/09

Plunge Protection Team
Gets a call from Goldman Sachs
With a hot new plan

Buying the Rumor on Mortgages

The DJIA was trading down by as much as 2.5% today until it closed with a tiny loss. What gives? Apparently the lack of detail in the Treasury's bank rescue plan was beginning to spook some big-shot investors:

This meeting known as the "Goldman Sachs rountable" took place just hours after Geithner's speech (and the dismal market reaction) on Tuesday at the headquarters of Goldman Sachs in lower Manhattan.

Around 20 of the firm's biggest hedge fund and private equity clients from around the country showed up-a testament to just how concerned financial industry insiders are about what few details geithner presented.

The Plunge Protection Team apparently has a plan B, with an uncredited assist from Government Sachs. Hints at troubled homeowner rescues are beginning to appear:

In a major break from existing aid programs, the plan under consideration would seek to help homeowners before they fall into arrears on their loans. Current programs only assist borrowers that are already delinquent.

That announcement came just in time to snap the market back up. Magic! Maybe I give some people too much credit. Maybe the neat ideas hatched by private investors in a GS conference room can't be translated at the speed of light into a newsworthy leak. Maybe those same investors can't order their traders to buy into the market on that same leak. Oh, perish the thought (sarcasm filter off).

On the other hand, note the second bullet point in the article on the hasty GS meeting:

Ken Griffen, the founder of Citadel, stressed the need not merely to fix the prices of the securitized bonds, but also that any plan must stabilize the root cause of the problem - the mortgages themselves. And he came up with several ideas to spur homeownership that could revive the housing market.

Wow! He knew exactly what kind of new plan would move the market back up! I bolded some stuff in the above excerpt. This "mortgage plan under consideration" went from conference room suggestion to tentative government program in less time than it takes an investment banker to scan the WSJ for deal action.

Concidence? You be the judge.

Nota bene: Anthony J. Alfidi does not hold a position in GS. He was not invited to their private conference either. Maybe next time.

Plunge Protection Team Lets It Slide

Markets are down 10% since the election. Today's chart tells it all:

Maybe someone should take a look at whether a large block of long positions in DJIA futures have just been unwound. Incumbent parties have never shied away from using the Plunge Protection Team's resources to make the U.S. economy appear healthy prior to national elections. That is no longer necessary.