US Equity Rally in Context From the Start of the Bear Market

So far the rally appears to be 9/10ths short covering and momentum speculation.

In order to proceed further and break through some formidable overhead resistance real buying by insitutions and individuals must appear and the volume adjusted cash flows must turn more positive.

In other words, so far a typically impressive bear market rally that may be getting overextended without a serious revaluation of the ecoomic outlook. Next week's Jobs Report may help in that assessment.

The insiders and hedge funds still holding equities would greatly enjoy the stock piggies (institutions, 401k's and private investors) coming back into the markets so they can continue to unload their increasingly worthless assets.



Here is the big picture. It is 'possible' that this is not a bear market which we are experiencing.

However, there is a dramatic spread between 'possible' and 'probable' that even our mighty Fed and Treasury cannot easily diminish with their printing presses.

Silverton Bank of Atlanta Fails

Silverton Bank of Atlanta, Ga. fails; 30th of year
By Wallace Witkowski
4:17 p.m. EDT May 1, 2009

SAN FRANCISCO (MarketWatch) -- Silverton Bank, N.A., of Atlanta was closed Friday by the Office of the Comptroller of the Currency, according to the Federal Deposit Insurance Corporation, making it the 30th bank failure of the year and the 55th since the beginning of the recession.

FDIC said it created a bridge bank, Silverton Bridge Bank, N.A., to take over operations. The bank did not take deposits from the public or make retail loans, but was a commercial bank that had 1,400 client banks in 44 states. At the time of the closure, Silverton Bank had about $4.1 billion in assets and $3.3 billion in deposits.

Cracking Down on Naked Short Selling of Treasuries

The 'fails to deliver' statistics on debt instruments is almost as interesting, and a bit less opaque, than the naked short selling of equity instruments.

A "fail to deliver" occurs when someone sells an asset such as a Treasury note to another party and then does not deliver it within a reasonable period of time.

As you can see from the chart, this had become a pandemic fraud recently as investors flocked to Treasuries as a safe haven and the usual front running hedges started falling apart.

Let's see how this works, and if the 'financial charge' is more than a wristslap to the hedge funds and banks who engage in these practices.

Now, if someone could kindly turn some attention to the obvious naked short selling in commodities and equities, other than when their banking friends are in trouble, we might see a return to markets based on some reasonable approximation of the fundamentals and price discovery of value, rather than blatant manipulation of nearly everything as facilitated by the demimondes of Wall Street.

The banks must be restrained, and the financial system reformed, before there can be any sustained recovery in the real economy.


New York Fed Applauds Implementation of the TMPG's Fails Charge Recommendation
May 1, 2009

The Federal Reserve Bank of New York welcomes today’s implementation of the Treasury Market Practices Group’s (TMPG) recommendation that settlement fails in U.S. Treasury securities transactions be subject to a financial charge when short-term rates are low. The TMPG worked with both buy- and sell-side market participants to address a weakness in market practices that became apparent last fall when short-term market interest rates neared zero.

The New York Fed has adopted this new trading practice in its own market operations and continues to encourage its adoption by all market participants. (The New York Fed was frontrunning Treasuries and selling them naked short? LOL Maybe they were getting tired of the abusive insider trading since they were now in a position to support the bonds. - Jesse)

"We applaud the dedicated efforts of the TMPG in spearheading the development and implementation of this targeted solution to the settlement fails problem," said New York Fed President William Dudley. "This significant milestone in the evolution of Treasury market practice demonstrates that groups, such as the TMPG, are effective in addressing deficiencies in market functioning and facilitating market best practices."

The New York Fed acknowledges all of the market participants who joined this effort to develop this new trading practice guidance. In particular, the Securities Industry and Financial Markets Association, the Fixed Income Clearing Corporation, the Securities and Exchange Commission and the U.S. Treasury Department have provided critical support and guidance throughout this process.