The Blog Of The Securities Industry Professional Association


Breaking News: For Immediate Release 


The Federal government has announced plans to prohibit individuals and institutions from selling their stock until further notice.  “This ban on selling stocks and only allowing buy orders should result in a higher stock market by years end” said one Federal Regulator who added. “ the only way we can sop the slide in our markets and economy is to give each American a government loan and have them buy as much stock as possible””

Wall Street executives cheered the proposal and believe this should increase Firm revenues and most likely cause profits to soar and allow the top Executives of these firms to use their TARP assistance money on year end bonuses instead of trivial minutia like net capital and unsecured debts. One Prominent CEO shouted “Its about time investors learned that they should buy stock when we tell them and only sell it after we have gotten out of our positions, this is the basis for an orderly market”

Congressional leaders have been mostly positive about this idea however they have already made it clear that any ban on selling stock must be accompanied by a large government plan that will educate investors on the importance of only buying stock.  One congressional leader estimates this new government agency would employ thousands of new workers and would have an annual budget of 10 billion dollars.  Congress also wants assurances that capital gains can be assessed to all positions based on value. Normally Capital gains are applied after a sale but since selling stock will be banned, they believe a tax on the actual holding value is appropriate. 

Ok everyone…Take a deep breath and answer this question truthfully:

How many of you thought it wasn’t a joke?  The truth of the matter is that at this point our government has thrown so much crap against the wall that they will stop at nothing to make the market go up.  Lets do a quick recap of the actions taken over the past year:

  • The Fed has lowered Interest rates about every other week depending on economic  statistics, Ben’s mood and pleas from wall street executives
  • The fed arranged for the sale and financing of Bear Stearns and Merrill
  • The SEC banned Short selling for 4 months
  • The Federal government bought the largest insurer in the world (AIG)
  • The Federal government passed a Trillion dollar buy out plan of the banks
  • The Treasury announced that the largest brokerage firms can become banks and be regulated by him
  • The Federal Government started buying Preferred shares of stock in banks and brokerages
  • The Federal government took over the FNMA and FREDDIE MAC, the largest mortgage companies.
  • The Federal government provided guarantees and liquidity for every Money market fund.
  • The federal government allowed Goldman Sachs and other at risk firms to use part of their TARP money on executive bonuses (11 billion for GS!)

So here we are on November 12th 2008 and the Treasury Secretary has announced that the TARP plan does not appear to be working as of yet and wants to enact even more change, including using the money on non financial industry companies.  The obvious target here would be the car makers of Detroit.  With all due respect to GM and Ford, why in the world would you loan them 50 billion dollars?  It’s not like the government is going to be giving them money and the American consumer is suddenly going to wan to buy a Chevy Impala next week?   As we have stated before, it’s our belief that poorly run, companies with little or no innovation nor should competent management be allowed to go under.  We should not throw good money after bad.  GM, Ford and Citibank and Morgan Stanley are all basically the same. They are poorly run companies that took huge risks, over paid for their executives and showed little foresight.  The market will continue to slide until investors believe profits and growth are in the foreseeable future.  Right now, the government is throwing a gimmick a day at the problems to try and cover up for these companies’ failures and in the process they are making matters worse and causing more harm then good by printing money and hoping that by that mere act, Ford and GM will suddenly have fuel efficient and reliable cars and that Citibank and Morgan Stanley will have compliant and rationale leadership to review risk factors.  But don’t worry, at the rate the government is going, pretty soon they will own the Auto Industry and all the largest brokerage firms.  Maybe they can make a deal and provide free limousines for all the big wigs on the Street?

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November 12th, 2008



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