NEW YORK, NY So much for far gone conclusions and other assumptions that build on conventional wisdom. Everyone said that the rescue plan was going to pass, some, albeit, hedged their bets but few said it wouldn't happen. I think that the markets knew it wouldn't happen. Certainly, the sense of urgency lost a fair amount of sway with so many giant financials biting the bullet. Proponents were running out of individual reasons to pass the deal. The "Rest in Peace" list now includes Wachovia (WB), which is technically not out of business but for all intents and purposes the firm, as we knew it is gone If part of the plan was to save banks then there aren't many major banks left to save. We've seen havoc wreck investment banks and wipe them out through bankruptcies, fire sales, and changing business models. We've seen money center banks with national footprints go belly up, and next on the radar are those so-called "super regional" banks.

Moody's and Politicians Said Knock You Out

Ironically, those super regional banks may have been just unsophisticated enough to make it through this malady. I think that pressure ratchets higher for politicians when local banks begin to bite the bullet. On that note, rumors are running rampant that Moody's (MCO) is looking to make a series of ratings downgrades on super regional banks. This is a movie that we've seen before, a financial company's shares come down hard and fast and then one of the rating companies makes a late downgrade that more or less serves as a knockout punch. There has been talk of reining in the power of Moody's and Standard & Poor's, and that is a good idea. These guys were super late with respect lowering triple "A" ratings on assets that were anything but worthy of such lofty assessments. Now, these same agencies are more or less pulling the pin that detonates these fragile entities like hand grenades.

Yesterday saw the ultimate knockout when Congress shocked the world by voting against the rescue package. The plan was dubious from the start but mostly everyone agreed that it was necessary. It was billed as the "Plan or Armageddon", and before it could be voted on politicians set themselves up for victory laps at the expense of their rivals. The gamesmanship began with separate press conferences where the opinions of the other party were (falsely) represented, and the media mostly took the bait. All this was going on while the bill itself wasn't tweaked enough to make many politicians bold enough to cross their constituents. Let's face it, 94 Democrats voted "nay" on the plan, which was pushed hard by the party's leadership. The Republicans took out that ACORN stuff, which was appealing to begin with, but then they couldn't wrap their arms around the rest of the bill.

The bill wasn't good in the end and that is something everyone should acknowledge and address. These considerations should be considered when the vote is taken up again on Wednesday:

> Suspend mark to market accounting
> Suspend taxes on repatriated earnings
> Get serious pledges that banks will make money available
> Raise FDIC insurance to $200,000 or more
> Cut capital gains

I think that the insurance part of the Republican counter-proposal is too hokey to pass muster and should be dropped from any list of demands. I must admit, with the Democrat leading in the polls it is unlikely that capital gains taxes would be eliminated or suspended because the idea is to actually increase the tax, the rich could afford it, after all. The rest of the possible compromises could be made, although I still haven't heard a word about making banks lend money. It's hoped that banks will begin to lend money, but how farfetched is that when there will still be industry suspicions where banks still distrust other banks. If we give these guys cash we also have to give them a swift kick in the behind. I can't believe the populous, whose sole concern is that a handful of guys don't get over, aren't hounding their elected officials to ensure banks open the spigots.

Be that as it may, the reaction of stocks and the frozen credit markets will light a different kind of fire under Washington. There has to be more compromise, but it would be shocking if a bill wasn't passed this week. In the meantime, I think that the Federal Reserve will take emergency steps and cut interest rates because of the financial turmoil in the Euro region could counter balance weakness caused by such a rate cut. Moreover, to get those spigots I mentioned earlier open...there has to be a heck of a push. As for the next vote, it goes without saying when people pick up the newspapers today they'll start to consider how the crashing market just might reach into their little corner of the world. Look for opinion polls to shift dramatically as folks on Main Street overcome their desire for Schadenfreude and begin to consider the implications of what could happen in their own individual worlds.

With that said, it is a sad political commentary that while both parties paint the other as uncaring or slow on the draw neither the current president or the future occupant of the White House could get their troops to follow their lead. Both presidential candidates gave it there blessing and President Bush tried several angles from looking and sounding forceful to looking and sounding desperate. As for another reason Main Street might be motivated, the $1.0 trillion lost in the stock market yesterday didn't just come out of the pockets of a bunch of old fat guys smoking cigars and longing for the good old days when their forefathers underwrote the expansion of the British Empire. It was the worst single point session in history, and although not in the top ten percentage losers it will be the biggest financial wake up call since 9-11.

Technical View

It's almost silly to talk about support points in this freefall environment but I think that there is some support at 10,200 on a closing basis. Below there we could see 10,000 as a real psychological point, but the fact of the matter is that there would be little support all the way down to 9,000 or so.

Six Year Dow Chart

Crude oil was hammered more than equity markets even with the specter of the dollar getting weaker. That dollar down/crude oil up chestnut didn't seem to stop the overarching fact that weaker economies mean a dip in demand. We are talking weaker global demand. Although the correction in crude oil has been remarkable, I have marveled more at how quickly it moves up versus coming down. However, yesterday's move was eye popping. Next stop for crude oil is $91.00 a barrel.

The package failed and the market tanked. There will be finger pointing for years to come. I'm still confused how the Democratic leadership hopped in bed with President Bush in a scenario that feels like the lead up to the Iraq War. Adding another measure of irony is that 94 Democrats voted against the bill (132 Republicans voted "nay" while 60 voted "yea") and only 141 voted for the plan.

Lucky Number 777

How appropriate that the Dow Jones Industrial Average finished down 777-points? In most slot machines that number is considered a big winner, and while nobody felt victorious yesterday the fact is that the session could have been the much needed wakeup call. Over the years, the stock market has become more of a casino where short-term gains at the expense of logic and fundamentals sent stocks higher than they should have been or lower than they should have been. The wild swings make for great ways to make easy money...if you're on the right side. The notion of investing has been lost on the investing public. It's frustrating to watch and makes old school investing difficult to pull off. One has to really believe in the underlying fundamentals even when everyone else is heading for the hills.

I think that it begins with how we talk about investing, many people "play" the market, buying one stock at a time on a hunch. We were hoping for three cherries and ringing bells but instead we got our bell rung, yet maybe it's the wake up call we needed. We try to take advantage of wild swings in the market but that should be no more than 30% of one's portfolio. After the market crashed, the post tech stock world saw people ratchet up their risk bets and shorten their investment time horizons from days to minutes. I think that at some point things will go full circle and investors will begin to look further out than next month's options expiration day, but I wouldn't bet on it.

This Morning

The market is indicating to open higher and overseas markets made admirable rebounds. However, the undercurrent of fear is palpable. At this stage of the game so many stocks are oversold. The strong action in futures is encouraging, but the way that equities have bounced around lately I wouldn't feel confident if the Dow Jones Industrial Average was indicating to open 777-points higher. With that said, we aren't going to take the bait. We aren't going to force the issue this morning. I will reiterate the need to have cash and to be prepared to put it to work. It's not about pinpointing the exact bottom but instead taking advantage of the current turmoil. Today is redemption day for hedge funds and that could add pressure to the market, although it goes without saying that much those redemptions occurred yesterday.