S&P Don't See No Bear

Who is this Scott Bugie at Standard & Poors who so astutely offered this wisdom:

"The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation write-downs of subprime asset-backed securities,"

According to a Reuters report on Thursday, S&P's statement gave a boost to financial stocks and helped Wall Street indexes pare losses. That report was headlined in many publications in a manner that leveraged up the hopeful slant to ridiculous levels.

And who is this Standard & Poors who the very next day:

"cut its ratings on Bear Stearns Cos and said it may cut them again, after the bank said a cash crunch forced it to turn to the Federal Reserve and JPMorgan Chase for emergency funds." (Reuters)

We are detecting some poor standards.

Bernanke the Wizard Turns Pigs Into Gold

Nothing heightens the surety of what you are doing in the markets than having magical forces from Mount PropUp sweep in to mudddle with the status quo.

The Quo is the steady disintegration of the Dow as it begins to reflect the reality of the economic condition in which we are living. In a world where asset values are falling (dollar/homes/debt) there is no reason for the major stock markets to remain levitated, and yet that won't stop Bernanke the Wizard from using all his powers to do just that.

While some of us (aka me) sat waiting for next week's Fed news, Bernanke, again, pulled a preemptive with the help of his wizard friends in Canada, Europe and elsewhere.

I am not quite sure of the incantation used, by it was something akin to taking the pigs from the village and offering to turn them into stacks of gold. It was not made clear how long the spell would last, but enough people became enthused at the prospect that the markets rose into the air by 416 points.

Yesterday was staggeringly annoying. For ultimately if the problems in the village are not fixed (that problem being excess pig speculation), then we are certainly not out of the fat.

What is worse, however, is the manipulation. Let us wax philosophical for a moment.

You know how people often ask why God does not stop evil? Many people take that question and drive their souls right into the twin villages of agnosticism or atheism.

Let us here think of Bernanke the Wizard as God, and the economy as, well, the world.

We can observe that every area of our economy is hurting not by some arbitrary process, but by the deliberate actions of various groups of people. Homeowners overeaching. Mortgage brokers being a wee bit too aggressive or crooked. People's lack of savings. Wall Street's financial engineering.

In essence God, in the form of Bernanke, gave us life (low rates), and we did some mighty crazy stuff with that financial freedom.

And now we sit, hand in the air saying, "What the hell?" Politicans are pontificating and promising to save us from the evil (of our own doing). Fingers are pointed. Homes are lost. Businesses fall under the weight of sin (debt).

So what does Bernanke, the Wizard do? He can sit back and let free will reign, where every man's will and choices are respected and the chips fall where they may. For why go totalitarian and make people behave? You don't want to force people do be good and create a restrictive environment. That surely is not what you want capitalism to be.

Or, you can interfere, which is what Bernake has chosen to do. He did that yesterday, and a few weeks back, and to little effect. In the process of this interference and attempt to save man from his own freewill, he has in fact violated the freewill of others who did not want the interference. For every time forces from the blue come in arbitrarily, it prevents the individual from making any financial action with confidence.

That is what you get when God makes everything right. You get less freedom. A God who stops evil is a God who keeps you chained to his better judgement, thus defeating his very purpose in giving you life. (That would be, to have free, creative individuals who choose his company by choice).

Bernanke, however, is not quite God. He is a wizard with certain limited powers. None of those powers include the ability to raise the dead, make people do right, or turn illogic into logic, or pigs into gold for more than a few minutes.

Thus we will suffer until our sins are reputiated. Like the prostitute loving governor of New York, Elliot Spitzer, many of us will refuse to acknowledge the results of our own freewill.

Kitchen Sink Level 10: Hillary's Bait and Ditch

With Obama having won Wyoming handily, the Democratic campaign moves its caravan to Mississippi, a land of milk and honey and black people, and where Hillary has fallen out of the political tree to slither her way into the lives of the innocent Mississipians.

With tongue firmly forked in cheek, she and her proxies are now offering a new idea (and again, still reserving the actual kitchen sink for post convention washing up), that perhaps we can have two for the price of one. Sort of the political wonder twins, where Hillary plays the boy. Or a Clintonian version of a buddy flick, where she plays Mel Gibson, and Obama plays the black guy, the sidekick (that would be Danny Glover).

She is not one to let her lack of a lead in voted delegates or the popular vote confuse the issue. Not in her own mind, and certainly not in the minds of the "rubes" down in Mississippi. She is leaving nothing for granted and is treating them, and us all, as innocents in the garden, wandering about mentally naked and unable to see her various tactics.

But let us count a few off:

• Most recently hoisting herself up by John McCain's bootstraps by way of endorsing McCain (and herself) as having reached a certain threshold to be commander in chief. In other words, if you don't vote for Hillary, then as a Democrat your next logical step is McCain? McCain probably has not felt so massaged by the wrong person in quite a long time.
  
• Calling Obama "naive," while at the same time dismissing him as just another Jesse Jackson type. A kind of "double stupid" accusation, with the level of condescension reaching toxic proportions.
  
  
• Implying that black voters are sheep, and that Obama's wins among blacks should be dismissed as "whateverrrr, it's only black people", while ignoring the numbers of educated and young of all races flocking to his campaign. Apparently if you can marginalize someone as the "black candidate", that should be sufficient to declare them unworthy. Not to mention the subliminals it sends to voters in places like Pennsylvania, who Hillary apparently imagines to be racists and a political plus.
  
  
• Approving the lockout of Michigan and Florida delegates up until the point she realized that she needed them. While banging Obama over the matter, she fails to harmonize her enthusiams for those two states with her actual choice in blowing off a bazillion smaller states when she thought she was ahead. Basically she has taken the Giuliani plan, multiplied it by about 12, and got the same inadequate result.
  
  
• She spun the photo of Obama in traditional tribal gear, if not actually being responsible for it (and issuing no denial), knowing that the images would remind people of the non-American components of his heritage. It was a tactic that the Governor of Pennsylvania would surely admit might be a hit with the voters in his state, given his generally low opinion of his own electorate.
  
  
• Attacking the caucuses now, but not then, hoping to use that as part of her argument that she should be the nominee. Behind in delegates, she will suggest that caucus wins are not like real wins, but rather, pretend wins or Fisher Price people wins. And there is a certain logic to the idea that the most loyal and active democrats who show up at caucuses should be ignored...it's called insane logic.
  
  
• The "3am" advertisement in Texas, suggesting that she in fact would be up in the middle of the night not wondering where Bill is, but sitting near the Batphone, secret government camera firmly pointed at your kids, making sure no harm comes their way, or that, like the actual girl in the advert, they don't turn 17 and grow up to be Obama supporters. Apparently, Obama will, somehow, kill your children. She has seen it all before. Remember the genocide in Rwanda? The worst genocide in the past fifteen or so years? Who was by that phone then and wasn't that Hillary "experience" time? As I recall, when that phone was ringing, Bill was getting busy, and Hillary was a bit distracted. Silly me. Foreign moms, and especially African foreign non-soccer moms, don't count.
  
  

And there is more. But it is late, there is work in the morning, and yet still, there is a mushroom pizza sitting on my counter awaiting my lips. It's 12am, and 3am in New York. My cell phone is right here, not ringing. Nobody from Rwanda is on my line saying, "Help, they are using the machetes and it's not to kill a goat for dinner!" Hillary put THAT call on hold. "Uhm, I have Bill on the other line calling from some apartment, can you hold on just a sec. I've been waiting all night for his call," said Hillary last time the phone rang.

So in these past few days we are graced with the latest Hillary apple of deceit. It's the bait and ditch. She is making soothing sounds to the voters in advance of the vote that she will definately lose on Tuesday in Mississippi. "If I win I am open to having Obama as VP" she and others seem to be hinting, by way of saying it.

The outrageousness of this is lost on nobody, and Tom Daschle, former Sentate majority leader and a co-chair of the Obama campaign responded:

"It's really a rare occurrence, maybe the first time in history, that the person who's running No. 2 would offer the person who's running No. 1 the No. 2 position," (from Washington Post)

Yes it is a very audacious tactic. It presumes a level of stupidity of epic proportions among the voting public, and is a subtle way of trying to suppress the vote. The election coming up is in a state where 37% of the population is black, so one can draw ones own conclusions. Her logic assumes that the Obama supporter, aware of his delegate lead, and her position teetering at the gates of hell hath no fury, would sit back and say, "Dang it, I may as well stay home and assure Obama the vice presidency". Like she can be trusted to even follow up on such an idea if we were to toss judgement to the winds and take her up on supporting Obama by demoting him prematurely.

Fortunately people are not so out of their minds, having long ago eaten from the tree of the knowledge of good and evil. We can see things now, so slithering about like the second coming of Satan with a sex change--or as a Monster-- pretty much fools only a certain subset of menepausal suburban women who identify with Hillary due to reasons having nothing to do with good policy, electabilty, or true vision.

Interdependence Tidbits

We will once again try, and try hard, to look away from domestic political events just long enough to reinforce the central theme that the world is not our own anymore.

Interdependence tidbits:

When reading the Wall Street Journal's "Media and Marketing" column last Thursday, we were momentarily suprised to learn that "China's ad market is valued at more than $60 billion annually...and is expected to overtake Japan's soon as the world's second largest in spending terms after the U.S."

Given the general feeling that marketing is akin to fluffery, (when done wrong, as it often is), one becomes amazed at the amount of money devoted to this endeavor with China as the target. Simply stunning. The article talks about the arrival of foreign advertising firms and rising incomes altering the expectations of Chinese consumers (as in, wanting less mediocre commericals).

Nor can you overlook the fall in various commodities this past week, particularly soybeans. Jeff Wilson reports on Bloomberg.com (3/7) of a canceled soybean purchase by China
due to a huge domestic drop in price, and thus:

Soybeans tumbled the maximum allowed by the Chicago Board of Trade, capping the biggest weekly loss since July 2005, after China canceled some contracts to buy soybean oil.

We are used to seeing foreign markets following our lead whether up or down, and here, the polarity is reversed.

Interdependence rising. Along with incomes worldwide.

The article continues:

Rising incomes in countries such as China, India and Brazil have increased demand for meat, dairy products and manufactured food products. Supplies of soybeans and vegetable oil have declined as record energy costs boost demand for biofuels made from oilseeds.

All of this is rather obvious to those who by employment or interest choose to stay abreast of this changing world. But the speed of change is sure to catch someone, possibly the individual investor, possibly the next president, possibly America, totally off-guard.

After Aggressive Stimulation, Ohio Comes for Hillary

Having tossed everything save for the kitchen sink in Obama's direction in the past week, Hillary showed up happy faced in Ohio, anxious to make her speech, and as early in the night as possible. We applaud her tenacity and encourage her to hold on to that sink, for she will need it to wash her mouth and (political) hands when all is said and done.

Lacking the needed electoral feast, but determined to turn a crumb into a hearty meal, Hillary continued to proclaim her experience to the sounds of her audience shouting "Yes SHE can".

It is perhaps telling that Obama's supporters tend to believe in the idea of change (as in, "yes we can make change"), while the supporters of Hillary, at that moment, had narrowed the vision down to Hillary herself.

Certainly Hillary possibly can, and will try. She will continue onward under the hope that the press gets tougher and that scandal involving Obama can be manufactured or found, so that the mathematical certainty of Obama becoming the nominee becomes clouded by character issues and debate. If you imagine that Hillary might have a problem walking across the sensibilities of the half of voters who back Obama, then clearly, you are not thinking at all.

Hillary suggests that she is the hardened one, and able to withstand scandal, which apparently gives her license to use the very methods that she railed against in the past. Further, she can use those methods knowing that for Obama to respond in kind risks compromising his central theme.

Of course McCain has had an easy time of it this past week. He barbecued ribs for reporters, and today accepted his coronation as King of Republicania. Huckabee bowed down, and out, and pledged allegiance.

But watch! Watch! For numeracy is not lost on Hillary's strategists. They know that the only way they can win is by virtue of swaying the superdelegates. The only way you can sway the superdelegates when you lack a lead in voted delegates or the individual vote count is to show that your opponent has negative qualities (and non-policy negative qualities) that warrant overturning the will of those voters.

Having lost all dignity, but still owning the sink, expect Hillary to get down low, to knees if necessary, knowing she can wash off when done.

Dollar Seceding from Community of Currencies

Somewhere we got caught up in the political swirl, our true task neglected to the extent we are babbling about politics without making any related analysis about money.

So we now set aside our brief Obamic delirium, but will follow in his footsteps by lifting liberally from an article by one Judy Shelton in last Friday's Wall Street Journal. She is an economist and someone we've never heard of before, but her piece, "Security and the Falling Dollar", is important reading. Indeed if an anonymous rabbit had written it, or a rock cried it out with verbal eloquence, I would be all over it, nearly plagiarizing it for your benefit.

Friday's Journal actually had more than a few worthy articles, including one on the rising prices of agricultural commodities, which fit quite nicely with what Jim Rogers (the bow tied investor once connected to George Soros, and now living with his wife in, I believe Singapore) was saying in an interview almost two years back in the book, "Inside the House of Money" which I have been slowly making my way through.

Judy starts off by informing us that the Director of National Intelligience pegged the falling dollar as one of the major national security issues facing the United States. Not merely the fall of the dollar, but the ascendency of foreign governments with new resources at their disposal, and their ability to influence the world (and the U.S.) financially for political purposes.

The fact that it takes very little on the part of a few nations to greatly cause the quality of life in America to meander in unpleasant directions is a message not preached at the campaign rallies.

And when we read of the general triumphant applause by U.S. political elites over Kosovo's rash decision to unilaterally declare independence, there seems to be a certain lack of realization that our financial world position grows more tenuous to the extent we are actually not considering other nations, their rational (or irrational) choices, and the impact of those choices. In other words, you can't walk tall, or straight, if you have no pants or carry no stick.

And increasingly we are that naked Emporer.

In her article Ms.Shelton points out various realities that ought to be somewhat disturbing, though not because the events are in themselves wrong actions by others. I fully expect the world to play up to their potential. That is, I expect nations to build huge piles of currency if they feel it's in their interest. It's rational for an Iran to want nukes or China to want more nuclear subs. I fully expect Valdimir Putin to be praised in his country for pulling it together and snatching the assets back from the democratic kleptobillionaires who grabbed up assets as the country collapsed, because it's natural for people to want a country they feel is strong, stable and benefitting more than a lucky seven. These attitudes and events should, however, be expected, considered normative, and factored into our expectations and how we conduct ourselves.

(Interestingly, in the same book, the ever astute Jim Rogers points out the rational reality of Putin's actions, while still proclaiming that the country is crooked and will ultimately disintegrate into multiple parts).

Our leadership has a tendency to expect the world to be rather thankful for mere existence, and we, deep down, are not ready for them to do a bit more than exist, for them to compete. We certainly are not ready for say, a situation where one of OUR native ethnic groups decides to secede, with the support of say, Russia and the UN, though we are well able to have the lack of judgement that European nations like Spain and Greece have. (Both knowing that they themselves have restive separatist groups, and that such groups exist all over the planet, and thus it behooves them to avoid getting the jollies over Kosovo secession).

Our shortsightedness and deliberate disregard extend to the U.S. dollar.

The article continues:

If gold and foreign currency reserves were the only prerequuisite for harboring global ambitions in the monetary arena, China could make impressive claims of its own with $1.7 trillion as of December 2007., the world's highest level. Japan comes in second at $973 billion.

It goes on to say that the European states have $511 billion, and Russia has accumulated $484 billion.

The article points out that Putin has called for denominating its vast oil sales in rubles instead of dollars and certain middle eastern nations have been making noises along the same lines.

American citizens by and large do not fully appreciate the benefits of having the language and currency that greases the world's transactions, but to the extent we grow financially weaker, and the dollar also loses value, a very wealthy world will not necessarilly sit back and watch it for long.

Judy suggests a "perfect storm of dollar desertion" with Russia and China and other nations banding together to create a kind of Asian reserve currency.

All of these musings and thoughts by other countries are important to the extent that the world is interconnected and to the extent we are the world's leading debtor needing foreign funds to keep us chugging along. Right now we happen to be in a position where the promise of even lower interest rates does not inspire confidence in those who must sell their assets in dollars, nor do our economic woes give us much room to be less inflationary in our policy.

These are issues that need to be discussed, and by the candidates.

Ms. Shelton then takes what I call a "sharp right turn." I have a friend who does that. We can be having the nicest conversation about some woman, how lovely her she is, how sweet, how smart, how tasteful in dress and then, bang, out of nowhere, he says, "I would do her really hard".

Whoa, whoa what??!?!? Ms. Shelton does the economic equivalent by suggesting that we return to the gold standard, by virtue of the U.S., Germany and France having the highest level of gold reserves. After pointing out the competitive threats to the United States under the system of fiat currency, she irrationally suggests that the world (who is in competition with the United States) would embrace a hard currency system dominated by the U.S, and at Russia's expense.

Right questions, ridiculous answers.

How about this:

How about we balance the budget, and reduce the national debt?

Our problem is not being on gold, or off gold, or even the dollar fluctuating. Our problem certainly is not other nations trying to do what we have always done.

Our problem is shortsightedness and not taking care of our own business. It's investment banks providing funds to mortgage companies that don't do due diligence. It's the United States applauding separatist movements despite the fact that a bazillion nations run the risk of having to deal with now encouraged separatists (the Basques and Kurds are smiling). It's lowering interest rates to bail out banks that should have had a better grasp on risk. It's individuals seeking things they cannot afford. It's funding Saddam to fight Iran then having to kill Saddam. Or funding revolutionaries in Afghanistan to kick out Soviets only to have to go back in to push out the people you financed.

We can quibble on certain details, but we really need leadership that takes a more nuanced view, and a more long term view. I can already see the looks on the faces when the Serb section of Kosovo decides to secede from Kosovo. What will we say then and will we be so supportive?

It reminds me of a person on a blog I was reading. The question was posed about ethnic groups seceding in the U.S. and the person responded, "Oh it can't happen here because it's not constitutional, simple as that". As though countries typically write in secesson rules for their minorities, prenuptial style. Only in the American mind.

Albanian Independence or Afghanistan Redux

Today is a peculiar time, and a time that might come back to bite the United States down some long unseen curve of the American derriere. With the backing of the European Union and the United States, Kosovo, up till now a part of Serbia, has unilaterally declared independence.

ABC News reports on their website that:

"Ninety percent of Kosovo's 2 million people are ethnic Albanian most of them secular Muslims and they see no reason to stay joined to the rest of Christian Orthodox Serbia.

And this is all well and grand, accept that Serbia main, and Russia, are not entirely pleased, with Russia explaining that this will only encourage separatist groups around the world.

And it means jack nothing to most Americans that the U.S. government is not so much making an argument for democracy as they imagine, but rather, for people to split themselves up into groups based on religion and ethnicity.

Putin is astutely aware of the broad number of conflicts that can be resolved by secession, though leaders here never imagine how such ideas, once caught, can spread like a fever.

In and of itself secession is not be such a bad thing, but there is a certain amount of American and European hypocrisy and shortsightedness on the matter.

But let's daydream a moment. Let us suppose that one day black Americans have a candidate who is running for president in a land where they were enslaved and denied rights for many years. Now let us also suppose that in the process of the election he is denied the right to be his party representative through the use of non-elected superdelegates.

Now let us further suppose, that the aggrieved party has core constituents of the same ethnicity who do not look favorably on what they consider to be theft and disenfranchisement. They become even more disillusioned with the nation. They form a BLO, a Black Liberation Organization, with political, military and terrorist wings. They petition the government to let them secede from the country in a state they dominate.

Our government's response is a clear and quick "No." Then Mississippi is declared Blackland, and with the support of the U.N. and E.U., secession is declared.

If the government thus does not give in to this version of "democracy," one would see a situation much like in Israel. Imagine living in a U.S where, periodically, bombs are going off on Wall Street, at your local Cinnabon, in the car parked along the Macy's Thanksgiving Day Parade, in the F train coming from Queens. Imagine four gunmen with automatic weapons and grenades standing at the intersection when your light is red, and the hundreds that can be killed quite easily.

It's a far fetched idea, and yet, those are the things we should be thinking about when we so freely apply solutions to other places that we would not dare consider for ourselves.

It's not so much that anything like that could possibly happen here, but rather, our inability to imagine the long term consequences of these actions we support.

Not to mention that the Albanians who seem to love us now for backing them in their pursuit of independence, might be the very same people who are fighting us in the future as radical Islam gains wider ground. Afghanistan redux.

It's a shame when Putin has to do the thinking for us. Granted there might have been no proper way to resolve this situation, but there should have been more discussion and slower progression so as not to build resentments as a nation sees itself cut down to size.

Oil and the Blood

Will there be blood?

That is the question answered in the Paul Thomas Anderson movie I saw last night, an odd psychologically black and white film where evil, stupidity or hypocrisy is affirmed in nearly every character. In brief, it's the story of Mr.Plainview, an oil man, who builds his fortune by buying up the land at the expense of his own humanity. He serves the dual gods of oil and hate, with a special loathing for people, and people of faith.

Religion is represented by a cherubic faced man-boy named Eli, who is from the family that sold Mr. Plainview drilling rights in the first place. Eli is the town's minister, and essentially a false prophet, and uses every opportunity he can to try to get at the wealth that Plainview represents. His congregation--always seen in groups--are presented as sheep, unable to see Eli for the manipulate imposter he is.

Surprisingly, considering the genius of Magnolia, the director faulters here in the presentation of religion. By making Eli the obvious hypocrite, and his flock the willing stooges that the wily Mr. Plainsview thinks they are, the film almost confirms his worldview, siding us with an alcoholic and murderer.

The oil world is much different now. All grown up and run by huge corporations and national entities. Exxon Mobil announced record earnings on the level of $40.6 billion for the year, the type of attention getting number that let's people without perception skills get outraged. Exactly what a company with over $400 billion in sales should earn is open to question, with those outside the industry supplying the most easily constructed and far fetched non-answers. But they know it should be lower, so that it creates less confusion between having your cake (driving whatever car you like to wherever you like) and eating it too (paying ridiculously low commodity prices at the same time a good portion of the rest of the world-China, India- is industrializing).

In the Dark of Night Bernanke Asks, "Am I A Whore?"

Sometimes you wake up (late), wondering things, like why people of deliberate insobriety want to chat you up on Phoenix buses, or why you've not heard a peep from your sister since she found romance on Eharmony, or why the woman you are deeply attracted to asks you questions like, "Do you think people think I am a whore?" And in the early morning that is much too much. You lay there on your cot looking out the window, marveling that it has been raining all night, a true raririty in the desert where two minutes of rain sends the local weathermen into end of the world overdrive, and all you want is more rest.

And after a hard day at work, you return home, stopping at the local supermarket for turkey salad, whole wheat bread, two sugar cookies, cranberry juice, and a Wall Street Journal.

Once home, you sit for a moment thinking about your more settled friends, with their jobs and kids and homes and sense of purpose. You think back for a moment about your dad, who died when you were still young enough to take his advice and follow his footsteps into the financial sector in Manhattan.

But you can't feel too bad, because on the other side of the world, maybe in Kenya, you might be coming home thinking "Mmmm tonight's a cous cous night", only to find that your neighbor Ikthabo (who you even loaned your big screen door screen to one day) is standing with a machete to kill you because you either did or did not support the current president. Darn it all, and you thought international diplomat of mystery Kofi Annan would straighten everything out in no time.

You pop open the Wall Street Journal and, oh no, not again. Not another hedge fund trying to push some company (the NY Times) into doing something against its own will. But yes. It's Harbinger Capital Partners, pens and power in hand, who want the newspaper to better allocate its capital. Morgan Stanley tried the same and failed.

Which kind of reminds you of the minds over at Cerberus, who imagined they could take Chrysler off the German's feeble hands, being firm believers in their own capabilities and wisdom much in the same way that a certain Eddie Lampert over at another hedge fund imagined he could take a mediocre Sears and a mediocre Kmart and create something other than mediocre squared.

Since Harbinger's vision is so large, it cannot be contained by merely inserting it into The New York Times. It is after Media General at the same time. Media General remains less diplomatic than the owners of the large NY paper. The Wall Street Journal quotes the head of Media General who says, "...most investors who aren't happy sell their stock and go on."

Which, when you think about it, is how things should be.

Or, you should own it. Don't tinker. Own it. Indeed, this election will probably be won by those who say they will own the problem and not tinker around the edges, as Republicans are wont to do.

But what the hedge funds and certain investors are trying to do is gain authority, and the rewards that come with it, on the cheap. You have to admire Marshall Martin's bluntness. Not that it's good for a stock to languish for lack of vision. Companies do need to reinvent their own houses, but the way you do that is not by letting a traveling homebuilder come and reroof your house on the quick.

The article had a nice little graphic that showed the downward sloping stock prices of the media companies in question, though it might have been helpful to actually show the performance of those braying loudly to be experts.

Everything is down now and reality is not exactly being reflected in our stock market: a market which remains relatively levitated. One can imagine Bernanke sitting in his Fed chambers, using every ounce of his Fed powers to keep things afloat, and he is starting to sweat. His mind is not a sumo wrestler, able to throw the economy down with a shove of monetary belly. He wonders also if he is too easy with credit, and too open to people who might just be using him for gain. He has seen the pimp hand, and it's not his own hand resting on his hairy thigh.

On Wednesday he will make his move and cut rates, probably, and then what? Markets will ride upwards for a nice little bounce and things being as they are (with nearly every major issue unresolved), the people, who are the market, will get jittery, and sell. Unless this time it is different and what looks so bad in real life is not really an East coast downpour, but a gentle Arizona drizzle.

You pick up your turkey sandwich, and a piece of pickle, and eat, then lie down to rest... again.

Mediocracy, Cousin of Thainocracy, Joins Merrill

Thain cuts an impressive figure. Every time I see his pixelated image in the Wall Street Journal, and read his bold and firm pronouncments, I say to myself, "He is just the man to take Merrill to a new level of consistent mediocrity".

Of course the thundering herd of brokers are probably pleased now that Merrill is refocused toward wealth management and not subject to the complex witchery of some bond trading desk back East (you know, where Jews and New Yorkers and evil people live).

It seems everyone is quite in love with Thain, the former head of the New York Stock Exchange who has stepped in as head of Merrill Lynch to right all the wrongs. If former head Stanley O'Neal produced some $22 billion of profits from 2002-2006, only to see it all get blown away in one quarter of 2007, as the N.Y. Times points out, Thain is not wasting any time in distancing Merrill from its previous perverted self.

Now I tend to view Stan's attempts to broaden Merrill's money making methods as quite practical, even noble. Aspiring to be like Goldman is not a bad thing. In fact I think all the wrong lessons are being learned by firms across the board, but especially at Merrill.

Blow ups happen. What do they call them now? Black Swan events, or unexpected rarities. For a Wall Street firm, unexpected events should be a given. You should surely expect that somewhere in the world some government may devalue something or some mortgage broker is greasing some home deal. That stuff happened, happens, and will continue to happen. Same disaster, different face. In the past it was hedge fund Long Term Capital Management getting caught by Russia devaluations. In the recent past it was mortgage backed security holders being caught with with assets backed by little more than NO DOCUMENTATION. During other periods it has been tulips or Japanese real estate.

In this particular difficult period firms across the board got caught flatfooted, and only Goldman's management was consistently monitoring their book. Notice that Goldman did not say, "Hot fudge, we better get out of this trading business and shift toward money management." They know what works and how to monitor risk.

If we are to fault former Merrill management, it is a rather normative fault in that they made the same errors in judgement that other firms made. The mistake was not, in fact, their trying to be like Goldman or taking on trading risk or dealing in CDO's and mortgage backed instruments. The error was in not monitoring the risk and being proactive.

Along comes Thain. Tall and confident looking. It's almost Valentines Day and a perfect moment for people to swoon and get moony-eyed. He sounds good. The name itself has aires of Britain and money. Thain might come in and decide that bonuses will be paid out 60% in stock, but that's okay because Thain is a fix it guy, and confident, and flies out to Arizona to let the asset manager types know that, "You are somebody." He inspires the type of confidence that let's you know that you will never be at the back of the pack again.

Of course, given the direction he is pointing Merrill, they might never be at the front of the pack either. Merrill will be comfortably stable and predictable. That is not a bad thing. We cannot all be at the top. Every child is not smart, every woman is not beautiful, every firm cannot be Goldman.

Who am I to critique Thain's rush to move Merrill to the same types of businesses and conservatism that every other collapse avoiding firm is rushing toward. Thus as the herd moves toward collective rentrenchment, that leaves greater opportunties for firms like Goldman.

Thain would be worth his press if he were to say, "We, like everyone, messed up in this one area of risk oversight. We are fixing that, and will continue to fire in all business areas". Now that would have been a pronouncement worthy of confidence that Thain puts out.

Alas the world (that being Merrill Land) is held by Thain in the palm of his derriere. There is Thain sitting atop the Merrill egg, keeping it warm and cozy. Will he know when to stand up, let it hatch and breath?