Are the Treasury and FED Reserve now taking over the toxic banks?

This could be a brilliant move on the part of Geithner and Bernanke!

Yesterday it looked like the stock market was being manipulated to take over the toxic banks without setting off a stock-selling spree. Think of it this way. In the past when a bank failed the short sellers made a killing, the stock holders lost everything, and the FED had to absorb the cost of toxic assets. The stockholders and FED were first the victims of irresponsible management and then the stockholders were victims of the short sellers and the FED. Now here is an equitable solution. The Fed cuts out the short sellers by selling the toxic banks short (diluting the stock) themselves thus raising the money needed for the takeover. Once they short the toxic banks and have cleaned them up they can use the remaining money from the dilution of the stock to buy back shares until all the money they took out of each bank (less the cost of its toxic assets) is restored to the shareholders. That leaves the banks/insurance firms private, solvent, and with new management when they are done. Could this be what was happening Tuesday February 17?

The market performed like the market of a socialist country where the government determines the valuation. It opened down about 4% and stayed there. Every small rally was followed by a sell off that seemed to keep the values near a government fixed level. If that is what the Fed is doing it would be an excellent way to stabilize the market and restore shareholders to a fair market value when they are done.

Bob Brinker must be ready to commit himself to an asylum after his January 15 alert telling his followers that the market had bottomed. He was about 8% late and the DJI has since then dropped 660 points or 8% back to the real bottom.

According to our Re-spiral indicator the market now has less than two weeks of life left to rally or to completely liquidate our stock holdings in anticipation of a major down move. Cash flow wise, the market is still sound but when the market is so close to resistance levels it is at risk of setting off panic selling. Yet historically the stock market should rise during the next two days as options expire this week.

China bottomed at the end of December and is now up 25%. Last night Asian markets were down with China down 4.7%, India down 0.2% and Japan down 1.45%. Hong Kong was up 0.55%.
China is worried about America. I have worked with the Chinese at Beijing University and they have had very pleasant experiences with Americans. We only faced off against China in Korea and in North Vietnam and the Chinese do not particularly get along with either of those two very aggressive nations. At this moment most European markets are down about 0.75% on average.

The US market futures indicate a flat opening this morning and perhaps a continuation of yesterday's manipulation. There is 30% to 40% headroom for this market to rally before hitting a resistance.

The financial stocks are now apparently under the able hands of surgeons Geithner and Bernanke