Shorters... Better... Run...

Savvy investors were allowed to short financial stocks again last week, and the crap-talking, doom-saying on the stock message boards instantly exploded yet again. Not surprising, shorters thrive on fear, so building negative hype is an easy way to make some money. Unfortunately for them, today is going to be the worst day of their short-lived shorting lives...

Thank the guy on the right. Last night and early this morning, details were finally given on the additional $250 billion bank equity infusion. The summary version is that all the big banks are going to be getting a huge, non-dilutive, chunk of government sponsored cash... Cash at government rates, instead of mobster rates (see more on Warren Buffet). This is good news.

Here's why this is great for banks: Banks get to shore up balance sheets and begin to lend again without having to hawk their businesses. Rates will be low, ratings from Fitch and Moody's will improve, and cash can start moving again. $250 billion to banks is $2.5 trillion they can start lending again, especially if they are in good shape already (read: JPM, BAC, WFC). Or, if they aren't in good shape, now they have much less stress (read: C, MS, GS). 

Here's why this is great for us: First, we get an equity share so at least we'll benefit from these investments. Secondly, money will start flowing again. Mortgage rates will SINK - get ready to refinance!!! Wait for 4%. Seriously, it will be that good. And of course, government backing of all deposits right now means we can get that big lump of cash out of our wallets. Go ahead, throw it bank in the bank. It's all good!

Here's why it sucks for shorters: All of the major downside risk pressures (i.e., bank blowup) just got eliminated. That means doom-saying is completely irrelevant. There may be some serious inflation, but all of the banks left are going to be here for a while.

So, sit back and watch the shorters freak out and cover for a loss. And be glad you aren't one of them. Or cry that you are. Then take your money and go buy Kraft, the Google of the next five years.