You’re Not Out of the Woods Yet, Kid; Thoughts on Obama Filling in Treasury’s Gaps on the Bailout and the Fickleness of the Dow

The Dow was up 500 points on Monday and we find ourselves wondering if what we feel beneath our feet is the floor or not. While Main Street and the congress are feeling bailout fatigue Wall Street seems to have voted, “yes!” on the details of the Obama rescue plan. Or have they?

Let me point out that Tuesday evening revealed a 100 point loss and today after a 200 point surge this morning the Dow finished down 34 points or just shy or half a percent. I would at this point like to point out the elephant in this happy room of financial optimism; the markets are fickle, and to think that filling in some gaps on the bail out will fix things overnight or provide a floor that won’t collapse two weeks from now is to fundamentally misunderstand the nature of the volatility of markets in general.

I am not advocating or predicting some doomsday collapse of the global financial system, far from it. What I am pointing out is that just because policy has been verbalized and wall Street thinks it is a good policy doesn’t really change anything. Obama did what he should have down weeks ago; tell the market the details, and for that I am thankful. However, now comes the hard part, putting this mammoth rescue plan into action in such a way as to create short term results that will help and not further cripple the financial markets and the banking sector. I believe that this can be done but action must be quick and decisive. It must also be prudent and wise if it is to count. This is not the moment to reshape capitalism. Right now the moment calls for the rescue of it.

Lastly, to my optimistic friends on Wall Street who want to believe that we’ve hit the bottom and this is indeed the bottoming out of the markets, I would like to offer a warning; some floors have trapdoors in them. To put it simply, you’re not out of the woods yet, kid.

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