The Mother Of All Bailouts

Euphoria reigned on Wall Street yesterday as a sharp opening rally gave way to a drop and a subsequent recovery, all caused by the government bailout plan of Fannie Mae and Freddie Mac.

Over the next few days, when more details become known, the markets may react to the reality of what really happened. The government bailed out an institution that should have been allowed to fail. This artificial prop-up will do nothing for homeowners, foreclosures, the credit crisis or the recovery of real estate in general. It was simply designed to throw a lifeline to an institution in order to protect the financial system. Nothing more, nothing less.

Of course, the total expense of this venture is the dark horse here, but what’s a few hundred billion dollars among friends? Eventually, we all get to participate in paying for this newly created monster.

The old adage “watch what they do, not what they say,” certainly rang true over the past few weeks leading up to this takeover event. Mish at Global Economics posted a great analogy in case you are not sure what politicians really mean based on what they’re saying. You can read it at “Paulson And Others Translated.”

Be sure to watch the music video referenced at the end of the post with the appropriate title “Take a load of Fannie.” It hits the nail on the head with a classic song, which is funny, sad and true.

In case you’re wondering, this rebound did nothing to change the direction of our Trend Tracking Indexes (TTIs), which are still under water and in bear territory:

Domestic TTI: -2.00%
International TTI: -8.23%

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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