Interesting Day on Wall St.

Today was an interesting day. Gap lower and then a climb all day long. GM bankruptcy filing now almost inevitable,the beginning day of a new quarter, and the FASB 157 ruling tomorrow. If it wasn't for the FASB 157 announcement tomorrow I would take today as a very very bullish sign in the short term, especially with it being the first day of the quarter and every reason for the market to sell off. As it is, it is hard to tell how much noise this FASB 157 thing is and traders not wanting to be short before the announcement. I was hedging today against some core shorts in preparation for the scam release tomorrow. The thinking is so myopic (especially as the government is trying to get the latest version of the TARP off the ground) to tell the banks the more assets you have on your book the more you get to create fictitious gains in our latest rulebook but you should be selling them before you get those gains because you can sell them at above market prices even if those prices will be below your fictitious mark. HuH??? Talk about creating a disincentive from what you really want!!! Pure idiotic genius at its finest. This stuff just boils my blood as we try to fool everyone into putting the man behind the curtain while in the process look the other way and not actually do things that would help to take care of the problem. Swedish banks bottomed at .2x book and they didn't have mark to market accounting. The problem is not the bean counting.

You had a major major major warning sign again today. Yes the debt markets. Scams aside the markets can't keep going up with the debt markets doing what they are doing. Even as we tell the bank, surprise, you can mark to myth and create fun feel good news, the underlying collateral continues to deteriorate at alarming rates as credit widened again today. Investment grade corporate and high yield corporate debt both were wider today. Every AAA tranche of every subprime mortgage ABX series made new all-time lows today except one and it was close. These tranches are around .25 on the dollar. I remember when people were saying the market was wrong at 50!! Also the spread of a AAA tranche of the commercial real estate CMBX index widened. This was the only area of the debt market that in the last two weeks was participating at all with the equity rally. Last couple of days, big reversal though still below their highs. (above at times I am referencing spread and times price, low price is bad and high spread (extra yield above say a 10 year treasury) is bad)

I still think in the short term we are shooting for 900 to 1000 but if the debt markets keep this up the rally will be smaller in scale and shorter in duration than I am thinking. Just completely not sustainable.