This is The Wall Street Digest Hotline Update for Friday, September 26, 2008, at 6:00 p.m. EST.
The market did not tank despite no TARP deal today. At the closing bell, the Dow gained 121 points, closing at 11,143, while the Nasdaq lost 3 points, closing at 2,183. The S&P 500 closed 4 points higher at 1,213. Oil closed $1.13 lower at $106.89 per barrel, and gold closed $6.50 higher at $888.50 an ounce.
Our politicians will work over the weekend to hopefully pass the TARP bill before the opening bell at 9:30 a.m. on Monday. Even so, the democrats have the votes to pass their bill today. They won't however, because taxpayers overwhelmingly do not want the $700 billion TARP bill to pass. How big is $700 billion relative to our debts? The Federal Reserve Flow of Funds data for the second quarter of 2008 reveals $148 trillion in debt.
A second comparison: Home mortgages totaled $10.6 trillion at the end of the second quarter. One-in-ten mortgage loans are in default or delinquent.
A third comparison: The Bank for International Settlements (BIS) revealed $596 trillion in debts which included $58 trillion in credit default swaps that are beginning to meltdown.
Final comparison: Citigroup has $1.1 trillion of assets off its books. Some of this bad debt dates back to the Enron Collapse, when Enron could not pay off its loan from Citigroup.
$700 billion is probably just a down payment to hold the financial system together. For how long, no one knows.
The real value of the $700 billion TARP program is to temporarily stop a financial collapse, which will give you and the Wall Street smart money time to prepare for the great economic crash between 2010 and 2015.
Now is a good tome to read "The Great Bust Ahead", by Daniel Arnold.
You should stay 100 PERCENT CASH.
Don't be surprised if the market moves back down to test the recent lows. I expect a profitable rally ahead if Congress passes a convincing bill that restores investor confidence in the U.S. banking system.
Stay close to our Hotline Updates.
The next Hotline Update will be on Tuesday, September 30, 2008, at 6:00 p.m. EST.