So let me see if I get this right.

Northern Rock is bankrupt, so the British Government "nationalizes" it (that is shorthand for "we come in, seize the assets, take it over, throw out the private businesspeople, and call it 'property of the government.'") Oh, and the private (you know, "ordinary Joe") shareholders? Speculation is that they'll get a big fat zero for their trouble. Certainly, they won't get much.

This results in a 3% rally in the FTSE and more than a 1% advance in the US Futures, never mind that we're closed for President's Day.

A what?

A bank - and a major mortgage lender - going*****-up is cause for a rally?

Did I wake up this morning and find myself on Mars?

Yes, yes, I saw the news that Quatar's SWF is "investing" in one or more banks, and might put in as much as $15 billion.

That has worked out delightfully well for all of the other so-called 'smart money' thus far, right? They've all made money hand over fist, yes?

Oh, wait, that's not how it has turned out? You mean these clowns have all lost their ass thus far? Well how the hell could I have gotten it that wrong?

There are many who will claim that the market's refusal to "sell off big" in the face of bad news means we have hit the bottom and there will be nothing more than "up up and away!" from here.

That's a very nice fantasy.

Unfortunately these same people said the very same thing back in October, and you know what happened in November, right? Then they said the same thing in the early part of December, when we rallied on bad news. Of course the last week of December and into January made that early December period a rather, uh "profitable" time to buy stocks, yes?

Then there is the "monoline problem." Is it serious? Well, what do you think? One of the "plans" being floated would split these firms into two and give the banks "a big equity position in the 'good' side to insure they're made whole."

Uh, wait a second. Made whole? Perhaps you can explain why they should be made whole? Oh, you mean that fraudulent "insurance" - that is, where you sell yourself something and then pat yourself on the back that your risk is now covered should somehow be subsidized? Yeah, I think that's what we're talking about.

Never mind this "money quote" from Bloomberg:

"'The authorities' encouragement of such a solution reveals their fundamental misunderstanding of basic commercial law and principles and also their sense of desperation,' said Musashi Capital's Mercer."

Really?

I think the authorities understand basic commercial law quite well. They're just choosing to ignore it. Basic commercial law says that you can't ignore insolvency and intentional mispricing of securities when you file your 10Qs and 10Ks (so says SarBox, along with just general commercial legal principles relating to fraud), and it also says that you can't write an "insurance" contract with yourself and claim your risk is "covered". Yet both things appear to have happened en-masse over the last three or four years and in fact are what made the property bubble possible - without that artifice we would have never had housing prices shoot the moon and folks making $8/hour cutting hair would not have been able to "buy" a $500,000 house (which is really only worth $250,000, but heh, that doesn't matter so long as there's another sucker, right?)

I would have loved to pull that crap and gotten away with it when I ran MCSNet. Oh wait - a lot of other people in the Internet business (and others in the 95-00 timeframe) did pull that sort of stunt! Like Enron's famous "barge" transactions, MCI's famously inflated "internet growing at 30% a month" claimed statistics and "price targets" put forward by Wall Street banks who underwrote the IPOs and were using those entirely fictitious "projections" to unload their shares onto the public - who then took 50, 75, even 100% capital losses.

Amazing.

WHERE ARE THE COPS? You know, the real cops! The ones that, were I to attempt this sort of nonsense with my TAXES, would come and kick in my door in the middle of night and haul me off to the hoosegow!

Distilled down folks, here you have it:

• Britain was just forced to take a bank and turn it into a government piece of property, because it was functionally bankrupt.
• We still have the "monoline" insurers out there making ominous ticking noises, with all sorts of delightful plans being floated, most of which will immediately squick all the common shareholders. Never mind that any such "bailout plan" is almost certain to trigger instant lawsuit heaven for years during which there will be TROs and counter-TROs while the existing book of business withers away on the vine and is eaten by snakes.
• The "word of the day" is obscure. All of these "plans" feature one central point - not coming clean as to the depths of one's exposure in this area or that. Absent that central point, none of these "deals" make any sense at all, and none would get done. That's sort of like trying to figure out exactly where you'd like to bury the body so nobody can find it, yes?
• "Market participants" have not increased their IQ by one iota over the last few months, despite punishing and repeated losses when they buy into the thesis of "buy because bad news is not producing a rout." Of course a month later the rout comes anyway - too late, you already bought!

By my math we're down 15% from the highs in the S&P 500. Is this a good time to buy?

Let me just leave you with an old, but classic statistic - on average, stock prices fall by 30% from peak to trough in a recession.

That means we're only 1/2 done, and if you use the last recession as a guide (2000-2003) it took you seven years to get back to "break even" if you bought at the top of the S&P 500, and that assumes you don't care about actual purchasing power.

God help you if what you wanted to purchase in 2006 was a house!

PS: Caroline Baum appears to be trying to rehabilitate herself by calling out Hanky Panky. I have to give her credit for that one..... now if we'd just get a more-honest view of the departing of "hard money" from our banking system (rather than reliance on someone from - gee willikers - a bank, who just might have a tiny conflict of interest when it comes to reality.....) I know, I know, that's asking for too much.....