Big Wheels Turning to Keep Proud Market From Burning

The beating the market has taken over the last six months or so has gradually but definitely softened up the hard heads and awakened the primal survival and protective instincts of the fiscal, monetary, and corporate powers that be.

Although the Dow (DIA) and the S&P 500 (SPY) didn't start to roll over until October, various industries were being pounded into submission under the surface, financials and homebuilders especially. The Darwinian nature of the market has it's predators (let's call them bears) and like all predators they gorge themselves on the weakest prey first (homebuilders). Having gathered strength in the form of profits they are emboldened to move up the food chain for the next sanguine unsuspecting kill. The process goes on until eventually they interface a force that is not so easily devoured. This is the proverbial "unexpected" and it is not discounted because it is just that. What the market has not properly discounted is that the Big Wheels of fiscal, monetary, and corporate interests have been quietly, deliberately, and concertedly closing in on all the things that ail this economy. While the pundits wail "no sense of urgency" and "too little to late," the writing on the wall suggests a major move is underfoot and likely to be more than a mouthful for bears heavily short.

The Big Wheels have acknowledged each other, allied themselves, and have been working out a plan for months. We don't know what they have discussed but perhaps it's likely that a few arrangements have been made, a few agreements have been reached. Bank of America (BAC), with the acquisition of Countrywide Financial (CFC), is acting like it's old self when Hugh McColl cleaned up during the RTC days. Although ordinary citizens like me become aware of something like this when news hits the wires, this is probably not the case for the Secretary of the Treasury or the Chairman of the Federal Reserve. It would be absurd to think that a deal such as this would ever be announced had it not already been vetted by the authorities and perhaps even encouraged.

It may be just as absurd to think that an acquisition like this is not part of the cure. Bernanke's globally televised congressional updates are just vagaries to the comprehensive remedy that he and other Big Wheels are already privy to. He has given direct information that the cure needs to be of a unified front, both fiscally and monetarily, and that "substantial" measures are on standby. However, the kitchen table architects of finance shriek, "lost credibility" so loudly it's as if these words were uttered only to prove themselves right.

The curiously light treatment Bernanke gets from the relatively better informed members of congress during these updates is a stark and telling contrast compared to the shrill criticism the punditry blathers out. Treasury Secretary Paulson would not go on TV with talk of a stimulus package unless the foundation had already been poured. This takes a great deal of communication and dialogue with lawmakers and indicates that much time and consideration has been given to this package already. In short, big wheels are turning to protect their interests.

Powerful comprehensive stimulus is on the way and has been for awhile. The bears have become arrogant and suffer from a sense of invulnerability but will face the unexpected. Reeling in their short lines... Well, part of the cure.

Disclosure: Author holds positions in some of the above-mentioned securities.