Traderbill's Financial Markets Weblog

…as TB said yesterday was the last trading day of the year for hedge funds. Even so, volume was just 834M shares or about half a normal day…you didn’t really think they would wait until the last day to close the books did you? Also, there were ‘inside days’ (lower high and higher low than the prior day) on the Dow Industrials, Transports and the Philly Semiconductor Index.

Not going to write any more about this as it is totally redundant except to say the gap between the bulls and bears is widening…especially over financial services. TB firmly feels we have not seen the lows there and agrees with the bears that even after another down leg the sector will be dead money for at least the first half of the year. Note also that most of the bulls concede there is more downside but have large positions to fill so they do not have the luxury of waiting for the lows to be in.

The political rhetoric continues with the Dems talking about raising taxes (but only for the wealthy which they still think, sadly, is $100,000 of income), and the GOP about cutting them. While there has always been a huge disparity of what wealthy is by state, it is inconceivable that politicians can’t tell the difference…have you ever heard of a poor one?…not by the time they leave office anyway.

But it is the definitions that bother you…letting the temporary tax cuts expire is called raising taxes…first of all they were allowed to go on far too long as the economy gained steam. Now the idea is to eliminated the AMT (a good idea), and the Estate Tax…which can be argued from either side…but what is to replace them? Meanwhile the deficits continue to build thanks to a Congress that can’t stop itself from spending on anything and everything in sight (both parties), and a President who blithely signed every spending bill…in fact every bill for six years, but is now concerned about tax and spend Dems.

But this isn’t a tirade on either party…or Bush…but rather the monster we have created. By the time Congress gets around to passing a bill and the President signing it, often the need has passed. This time TB feels there is little concern of that happening but the sooner something is done the faster the economy can heal…perhaps Wall Street with all those layoffs and accompanying severance’s…all subject to ordinary income and the AMT will help tax revenues…but that will only convince the government that they did something. Not only didn’t they do anything, they (the Fed, bank regulators, SEC, Congress, etc.), failed to prevent an obvious problem from turning into a global financial crisis. TB continues to feel that we are grossly underestimating the impact…including the tighter lending guidelines which will reduce the number of buyers even further for that glut of real estate on the market. Oh well, our kids can pay for it!…and their kids…and their kids kids…and…