It’s hard to believe that the S&P 500 was at an all time high just one year ago. The S&P is down 42% from its peak while the Dow is down 39% from its peak. Losses are measured in the trillions of dollars.

Sadly, I did nothing today. I woke up with the thesis I posted last night, that extreme pessimism could establish a temporary bottom that would be traded. CNBC had many talking heads this morning. All of them were positive. That blew away my thesis. It was as if everyone was writing articles about pessimism just to artificially create a bottom. Obviously, the bottom wasn’t established yesterday.

S&P placed GM on negative CreditWatch. People are complaining that the move harmed GM. I think the news was rather irrelevant. GM should have been downgraded long ago. Their bonds are traded as if they had already been downgraded. Their stock may actually reflect reality now. The ratings agencies haven’t been doing their jobs for a while.

Citigroup may be ending talks with Wachovia. I haven’t found a link for this yet (it’s on the TV right now). Citi has about $1 Trillion in off-balance sheet SIVs. I’m guessing that they will be valued at a slight discount after this week.

Commodities are back where they were a year ago. So much for inflation. Gold is up because gold is in money mode, not commodity mode. Note that the inflation play will be extremely wise in the future, just not yet. Deflation hasn’t run its course.

The president is going to make an announcement to “help” the markets tomorrow. You want to know what crazy is? It’s doing the same thing over and over and expecting a different outcome. President Bush hasn’t had a positive influence on the market yet. Of course, eventually there will be a bottom, and I’m sure it will coincide with some government intervention. They’ll call it a success and conveniently ignore every time they’ve been wrong. Once again, why listen to the people who didn’t see this coming and denied reality when it was bitch-slapping them in the face?

Was That It?

I don’t think that was the bottom. However, the talking heads are quite pessimistic this afternoon. I am thinking of cashing out half my puts and going half in. I think that there may be real long term value at these prices. I’ll still be day trading with options, favoring the downside for a while.

Update

Citi ends negotiations with Wells over Wachovia:

Citigroup backed out of negotiations with federal regulators and Wells Fargo in its battle for Wachovia Corp., but vowed to have its day in court.

Citi is screwed. They need those deposits.