Financial turmoil: Has it stopped?

It is almost impossible for our leaders to calculate what their moves interfering in the markets will have on our economy, banks, housing mortgages, stocks, bonds or Global markets. Hank Paulson, Treasury Secretary, along with Ben Bernanke, the Federal Reserve Chairman, are pulling every lever they know and trying to do it without Congressional involvement. But today's action was unbelievable. Because individuals are getting scared, as they should, about the soundness of our financial system, they have recently been withdrawing cash from Money Market Funds as these accounts have started to lose some value. Most folks assume that you can't lose money in a Money Market Fund. That was shown to be false as some have dropped below the threshold $1.00 dollar value, meaning that for every dollar you deposit into these accounts they are worth a few pennies less than $1.00. The Treasury and Fed saw people starting to remove cash and put it under their mattresses and so they now have stepped in to guarantee and insure these accounts to calm fears. It should work, but no one can determine what this will mean as it ripples into another area.

Once a government intervenes by taking actions without debate and understanding where each action will take them, they are tinkering with the entire system and instead of calming fears, they are exacerbating them. When will this stop? It is difficult to say. My guess is that we are in for a mess now for years to come. You see Paulson and our Republican led government officials are playing checkers instead of chess. In checkers you don't need to think as much about future moves as they do in a game of Chess. We need more Chess playing and less Checkers.

Is there any good news in this? Yes, it may ultimately help create a more even playing field for all investors and more transparency. Art Cashin, a regular figure on CNBC, said this morning, that yesterday was a very convincing rally for the first time in the stock market after the lows and he believes we may have bottomed finally. That is good news for a while too. He is still concerned that they have stopped the Shorting of Financial stocks and that isn't good he says as it exaggerated the move up by about 30-40% in today's Futures in pre market. Is it over? My guess is that it is not done yet, but we are closer than we were yesterday.

What has possibly caused this panic? When historians look back they may identify the removal of the "uptick rule" by Christopher Cox, the SEC Chairman, for those shorting the market. When the Rule was in force, traders weren't allowed to short a stock that was declining unless they did so when the stock reversed its trend and actually went up a penny in price. When Cox eliminated that Rule, traders could pile on a drive a stock down further often collapsing the price of the stock. There is a call this morning to reinstate the "uptick Rule."

So, as we sit here in pre-market, just a few minutes before the the market open, we need the break in this emotional roller coaster. I don't mind the break from the drama at all. Keep the faith folks and remember to pay attention to the political dialogue on this topic.