Is this the right move? MAI, ABX, KGC, Paulson from Goldman Sachs...

After a historic 11.8+% S&P, NASDAQ, and DOW -moving additional bailout press release yesterday by the Federal Reserve Board saying they will buy whatever debts the US banks are selling - essentially opening the tap to more irrational rally, today we are seeing some pullback on the DOW and NASDAQ.

Those unfamiliar with the scale of this one day move - it's the largest rebound in a single day since... 1987. And yes, it's that 1987. 

The Canadian exchanges TSX and Venture surged by 1,600 and now back to 800 - expected volatility is still at an all-time high according to VIX. (pictured above)

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. The VIX measures the cost of using options as insurance against declines in the S&P 500.^[1] Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

The VIX is quoted in terms of percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, on an annualized basis. For example, if the VIX is at 15, this represents an expected annual change of 15%; thus one can infer that the index option markets expect the S&P 500 to move up or down over the next 30 day period. 

If you take a look at peaks and dips of the VIX, you will quickly see that the last recent rough patches on the market such as post- September 11 attack and post dot.com crash of 2001, the index sees fluctuation up to 30-40 range. As a confirmation of just how ridiculously volatile these times are - October 2008 is now at an nearly non-sensical 54.99%.

Given that S&P 500 is at 1,000 - a swing of 55% will either be sub-500 or 1500+! Interesting times we're in, no?

With that out of the way, let us take a look at what really at with today's announcements. Even though it may appear similar that other countries have adopted a similar bailout plans - analysts are now confirming the US updated plan may have a much bigger failure likelihood.

The difference is, American banks allowed to fail

Commentary: Bank capitalization plans aren't the same for a reason

 On the surface, the American and British programs on bank capitalization look pretty similar, but key differences are apparent.

In both cases, governments are issuing preferred stock. Sure, the terms are different -- taking on the Brit preferred incurs a steep 12%-a-year payout; Uncle Sam wants 5% a year, unless the holding is still on the books after five years. 

But the real difference is to who it applies. In the U.K., the basic system was, get your capital up to certain thresholds privately -- or take the government money, and strings, to get there.

The US one, by contrast, is voluntary. Other than the "big nine" that got roped into taking the cash, there seems to be a strong incentive for all but the most troubled lender to take a pass.

 The British banking system isn't nearly as large as the U.S., and the Brits -- and for that matter the rest of Europe -- don't have a deposit guarantee program in place that the public trusts as much as the Americans have faith in the FDIC.

Banks in the U.S. can fail in an orderly way. In the U.K. and Europe, that's not the case.

And perhaps that's the real message behind the differing plans: the Americans aren't trying to save the whole banking system.

The Brits don't have a choice.         

Translation - some banks in the US are still slated to fail.

With the temporary relief of this supposely updated rescue package and the increase of FDIC insured bank account limit to $250,000 (from $100,000) - the FDR has certainly bought a bit more lifeline back into the market... you have to ask yourself though, how much longer can this charade go on for?

While Ben Bernanke has studied the Great Depression of 1929 thoroughly and understood that a tightening of credit is certainly the wrong way to go abouts (thousands of banks failed with limited credit to go around) - it remains to be seen if this is the right approach in this case of a systemic failure of depreciating assets, devaluation of $USD versus everything else, which leads to the popular fiat currency argument...

...in a time of crisis, what would you rather have? Printed paper that says $100 on it, or pounds of copper and gold in the ground?

Quality juniors continues to take a beating in the market. Minera Andes dropped to $1.00 earlier, Canadian Zinc Metals just raised $7 million dollars with zinc in the ground on a huge property in secure Canada's British Columbia province with overdemand despite lower zinc prices, and TNR Gold Corp announced excellent copper drill results at El Tapau and is advancing their case against mining giant Xstrata for 25% back-in and adjacent property - 11.2 billion lbs copper 43-101 compliant. 

Gold bullion and silver bullion fluctuated wildly yesterday, dropping from $900 to $830 today. Popular media says the safety haven investors flocked out of gold on news of government promise to secure banks and such - but read between the headlines and think for yourself. If and when more banks start failing (like Washington Mutual) - do you think Gold will catch on again? 

Look at eBay prices - it doesn't get much more retail than that. Compare that to Commodity Exchange and Future prices - an interesting study by a fellow retail investor Mr. Gabriel Gray... do you think there will be a de-coupling of reality and futures paper gold soon?