The big lie from Wall Street and the Automakers regarding compensation has always been,If you cut our salaries, our talent will leave and the firm's value will take a substantial hit. I have always maintained this was a big lie, with no basis in fact for the following reasons:

• Talent is overrated- if one is truly superstar talent, people will knock on your door and try to poach you regardless of the economy
• Talent is in abundance-there are more talented people without jobs who sit in Starbucks all day than people who are employed.
• The unemployed talent would love to take your job for less money.
• Executives under pay scrutiny have basically two options- take a haircut in pay or start your own firm. Option 2 costs money which most don't have

Today's NY Times confirms this big lie. Here are some excerpts:

“For months, Wall Street banks and the troubled automakers feverishly protested that their top executives would flee if they were not lavishly rewarded for their talents. New data, however, suggests the departures were more of a trickle than a flood.

Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.

The relative stability, at least within the executive suite, suggests that a soft job market, corporate loyalty and personal pride helped deter the feared management exodus at the companies hardest hit by the pay rules.”

Just as the GE hammer bottom we talked about in our March post was a great time to buy, now is a great time to sell. Middle to late September should be the ultimate time to get out. Yesterdays action was indicative of a short to intermediate term top. Leaders like GE made major reversals yesterday, forging into new high territory and closing lower on volume. Will this be a pause that refreshes or the beginning of the double dip to test the lows? No one knows for sure, if they claim that, they are liars. But I can smell profit taking.

One year after Lehman and nothing has changed. Banks will not lend you money but they will charge you exorbitant fees for overdrafts and late payments. Bank management will award themselves elaborate bonuses while laying off their underlings. Foreclosures continue to set records, NFL stadiums are not selling out, ticket sales on Broadway are down. The average persons life sucks whether or not the banking system was saved.

The 2009 Jerry Lewis telethon raised $60.5 million, $5 million less than last year, another sure sign that the economy is still in the pits, with no sign of meaningful recovery. Some multi decade trends have been reversed--first the State of Florida has lost population this year. This was the first year over year drop in over 60 years. Now, donations to the MDA telethon have waned. Further evidence that there is no money out there anymore.

Citibank aka Citislime, is fattening the salaries of its employees and at the same time raising the interest rates on 15 million credit card customers. They are able to be so bold because the government has their back. If the increased credit card rates lead to higher default rates, the government will bail them out again. There is no risk to Citislime so they are pushing the envelope. Either way they will get their money, either directly from you the credit card customer, or indirectly from you the taxpayer.

While walking my dog early this morning, I saw all my neighbors who work in finance very chipper as they headed for work. Banks are very busy pushing loans to close before the quarter ends on June 30th. They will report great earnings and pat themselves on the back with bonuses which they think they deserve, but we know they don't. After this "comeback" quarter, the economy will lapse back into a coma this summer. Bankers know how to strike when the iron is hot, and they really know how to get paid! They know how to rip off the consumer and they know how to overpay themselves. America is a great country! Nothing has changed. They may have been humbled for a couple of months, but they are now as arrogant as ever. Those that still have jobs that is.

Apple is trading around $138 today. It is a sale, and if you are aggressive, it is a short for two reasons: 1. It has rallied over 75% in a little over 3 months; more importantly, it unveiled the next generation I-phone, but the buzz was muted. No lines outside most Apple stores; Blackberry and Palm are also more formidable alternatives.

So far so good on the GE hammer panic bottom. GE is now consistently trading over $10 from its low under $7. The Dow is up almost 1500 points off its lowest low. Not coincidentally, a friend who I regard as a great trader on Wall Street called me at the beginning of the month to tell me he was seriously considering taking a job as a doorman. Another person very close to me manages a small brokerage office in Florida. He spoke of panicked investors pulling their accounts. He was worried for the first time in this business and he has been in business over 20 years.

This fear does not show up at market tops but at market bottoms. They may not ring a bell that says buy, but if you can read the fear in people's eyes, there is money to be made.

Could today's action mark what candlestick chartists call a hammer bottom on GE? GE traded at $5.73 intraday, closed at $6.69 on tremendous volume of approx 750 million shares. GE trading at this level would be an unfathomable occurrence less than a year ago. But by today's standards of imploding stock prices by America's formerly large companies, its just another day at the office! Only time will tell if today marked the end of the liquidation phase of this brutal bear market.

We have now entered the phase of this bear cycle when the news gets worse and the stock market goes up. Most will be scratching their heads not realizing that the market is a discounting mechanism, always looking forward not at the past or even the present. Couple this with the year end incentive to prop the market up to save some face and we could get a nice December. In 2009 all bets will be off as more businesses fail and we may get a test of the lows again. But lets enjoy this disconnect for now. The S&P needs to stay above 870, and a close above 900 will trigger higher levels, perhaps even to 1000. The Dow has drawn a line in the sand at 8000 with resistance at 9000 then 9400.

An official recession was declared today by the bozos of the National Bureau of Economic Research. They are a year after the fact. Why employ over educated no nothing economists who live in a bubble to look at data all day and make worthless forecasts? Just ask the cab drivers, truck drivers, Fedex and UPS drivers, retail clerks, hotel maids, etc..... What a novel concept-- ask real people about real issues. They would have told you we were in a recession in 2007 when it mattered and when you could have done something about it.

The NYC Real Estate market is officially kaput. It has long been exempt from the nationwide downturn, from subprime, etc. Until now. Buyers are scared, banks are not lending. Layoffs from Wall Street abound. Foreign buyers have shunned the Island of Manhattan. Game over. The residential real estate market is on the brink of a severe downturn. And the bigger they are the harder they fall.

This was the biggest one day gain ever by the Dow. 29 of the 30 Dow stocks were up except for GE--which speaks volumes about the sustainability of this rally. It seems clear to me that GE is now being used as the institutional money fund yielding close to 6%. Money comes out of GE and into other stocks, then back to GE when the rally fizzles. In other words there is no new money coming into the market, existing money is just being redistributed seeking higher short term trading returns. This rally can have legs, days, weeks or a couple of months until prices move to a level of important resistance and the sellers come out of the woodwork again. Enjoy today. For those nimble enough to trade this rally promise yourselves that you will not give back any of those hard to come by gains, if and when the market has another leg down.

Fear is rampant on Wall Street. The Dow breaks 10,000. At one instance today it was down over 800 points. The VIX (volatility index) reached 58 an extremely high number. There were 1364 new lows on the NYSE vs. 3 new highs. Technically, its as extreme as it gets. Cramer the clown is now telling people to sell after most major averages are down 35% from their highs. Until this new philosophy, his mantra was "There's always a bull market somewhere" And he is right, only now in hindsight, his bull market was in stupidity.

The perma bulls even recognize we are in a bear market. Pollyanna economists now admit the economy is in a recession. The great unwind is upon us and it is in its most violent phase. Those that have kept cash waiting for this "rainy day" are licking their chops. GE yielding over 6%; FCX trading around 37 down from a high of 127; Apple Computer from 182 to 87. Start loading up on the long side, but with quality. The crap will never come back.

Yesterday and today GE was yielding close to 6%, Goldman Sachs this morning sold at around $86 below its book value of $100. Ben Stein the Pollyanna economist finally threw in the towel. Its also option expiration week and nobody uttered the word "bottom" today on CNBC. So this can only mean one thing, Buy! Buy! Buy! Buy quality names, not the dogs.

A glaring example of how we got into the trouble we are in is personified in an article in today's NY Post. A "Wealth Manager" and I use the term lightly, lost more than $6 million dollars of his own personal money in Lehman stock. Talk about not practicing what you preach. How did this guy get a job, let alone accumulate $6 million? These are the imbeciles we entrust with money? To read the entire article, click on this link, its too funny for words.

http://www.nypost.com/seven/09162008/news/regionalnews/i_lost_6m_overnight_129319.htm

It has come to my attention that my posts have become too dark, too serious. Its time for me to lighten up. So here's food for thought: The zit faced long haired teenager donning a Grateful Dead T-shirt who mows your lawn has a better business model than the Ivy Educated pinstriped suit complete with tortoise shell glasses and a Blackberry. The gap toothed freckled faced pig tailed 7 year old takes in more profits from her lemonade stand than Lehman, Merrill and AIG combined.

More questions to ponder--Are the new baseball stadiums being built by the Mets and Yankees in trouble? How many cancellation notices will the Mets and Yankees receive from season ticket holders who can no longer afford those over priced season plans for 2009? How many strip joints will be closing? How many charitable donations will be reneged?

"You've got to accentuate the positive Eliminate the negative Latch on to the affirmative Don't mess with Mister In-Between You've got to spread joy up to the maximum Bring gloom down to the minimum Have faith or pandemonium Liable to walk upon the scene" written by Johnny Mercer/Harold Arlen.

The above lyrics sum up the Pollyanna talking heads on CNBC. Buy, Buy, Buy!!! Its a bottom! I have heard more about bottoms than in a J. Lo music video. Then when something tragic happens its a surprise, because Wall Street is programmed to lie. Lie about solvency, lie about risk, sweep all potential negativity under the rug. Well now Lehman is belly up, Merrill is taken over, Wamu is on the ropes as is AIG. But if we went to the videotape and pulled the CNBC appearances over the past 12 months, all you would hear is, "There's value here. Its an overreaction. There is plenty of capital available. Buy! Buy! Buy! This watershed event will convert the Pollyannas, make them panic. Then and only then can we buy, buy buy---when these shameless imbeciles are on the unemployment line.

In this vicious hedge fund unwind liquidation phase of the bear market, even stocks I thought might be enticing on a pullback have gone through my pullback numbers like a hot knife through butter. For example AMED is now around 48 and AFAM has pulled all the way back to its 50 day MA around 35. In the case of AMED it is now almost 30% off its 52 wk high, and AFAM is now in the middle of a 21% correction. Hence the dangers of trying to catch a falling knife. And a great lesson for those who try and play upside momemtum in a bear market. DON'T try this at home!

There was an article about hedge funds in Barron's this weekend and its the kind of article you are sure to see repeated by various media outlets in the coming months. Hedge fund investors want their money back before it evaporates completely especially in the poorest performing Hedge Funds. But Hedge Funds are changing the rules on them. They are putting a moratorium on redemptions to stem the tide of money out of these funds. So here is a valuable lesson about hedge funds in a bear market--they are like the proverbial "Roach Motel" you can check in, but you cannot check out.