Leadership

I have been saying that Americans have no idea how significant and scary this credit problem is for the U.S. economy and all U.S. voters, tax payers, breathers, unborn babies.

I don't know why but I was thinking in general terms about leadership this morning. This country has none at the moment. We haven't had any since the Iraq war started, or shortly after. It's not that the current administration isn't trying. Nobody wants to listen.

I wonder what would happen if the country encounters an issue in the next 40 days that Main Street does view as being critical. Who will lead? Who has any credibility left?

We're going to need to get Jed Bartlett out of retirement.

Main Street/Wall Street

Popular opinion and retarded politicians have thus far prevented the country from "bailing out Wall Street." Let me put that in bold italic quotes.

Let's use Washington Mutual and Wachovia as 2 examples. In both cases, the debt wasn't wiped out, the Wall Street buyers (JP Morgan and Citi) are assuming that - and odds are history will prove that they were very attractive deals. The deposits weren't wiped out, the buyers and the FDIC have your back on that one.

What is being wiped out?

1. Thousands of jobs. The two banks between them employed over 150,000 people, mostly Main Street people. Not too many Wall Street fat cats live on Main Street.
2. The common stock of both. Lots of irony here. The problem was the credit, but the equity is what Joe and Jane Main Street own in their 401(k) plans. Gone.

What is Going On?

Wachovia is getting cut in half in the premarket even though the stock has already come from $60 to $10 as of the close Friday. This is happening even as Citigroup, Santander and Wells Fargo may be preparing bids.

Who the hell still owns Wachovia? Who needs to sell it this morning?

I don't get it.

Edit: OK, I get it now. The bid was effectively zero.

Apple Under the Radar

Morgan Stanley downgraded Apple this morning and nobody cares. Well, somebody cares because everyone owns it but nobody is talking about it.

The downgrade is probably correct. Apple is the ultimate consumer discretionary play and more and more investors are agreeing that we are either heading into a recession or in one already.

Regulation Question

Investors are waking up this morning to the news that the U.K. government had to rescue real estate lender Bradford & Bingley Plc and the Benelux government bailed out Fortis. This isn't a Wall Street problem and it isn't a U.S. problem. It's a global credit market problem and the system is unraveling as we speak.

Even if the system gets bandaged up and limps through, what we're going to need is much smarter regulation. With the leverage and the interconnectedness of all the players in the system, it's a huge job. Not many people even understand it. How much would you have to pay someone who is qualified to understand and monitor a balance sheet as complex as Lehman's? Will the credit market regulators be the new investment bankers?

Max Hypocrisy

I was busy today but just happened to notice that Nancy Pelosi moved front and center in the grand charlatan parade. In speaking about the rescue plan, she was quoted as follows:

"We sent a message to Wall Street: The party is over," Ms. Pelosi told reporters at the Capitol early Sunday evening.

Sure, that's a good sound byte. The party would never gotten to this spot had politicians on both side of the aisle not pushed so hard to have every American owning a home.

I'm glad that this part of the story is almost over.

Wachovia 2

It's interesting that the chatter at the NY Times and elsewhere is that Wachovia is in talks with Citigroup to be taken over, despite the fact that the rescue plan is reportedly on solid ground now.

Do they (Wachovia) know something that we don't?

Wachovia

Is next. Either they are or Nat City is. Next to go under.

Wachovia has 120,000 employees. Anybody who doesn't think this is a crisis that needs to be solved by Monday is a moron, inculding the 100+ professors who lined up and said so last week, former talk show host Mike Pence and this charlatan Senator Selby.

I'm moving back to Canada.

Speaking of WaMu

The WSJ today reports that U.S. savers have pulled $16.7 billion in deposits from Washington Mutual in the last two weeks, and that's a big number.

The bigger, more surprising number is that WaMu still had $145 billion or so of investor deposits as of its failure last night. $145 billion.

The ability of U.S. consumers to ignore really bad potential outcomes is a head scratcher. Yes, this failure was very orderly. It could have been much worse. anybody with access to a computer or a newspaper could have see it coming.

Had it been worse, the owners, or ex-owners in the event of deposits being over $100 k, would have been screaming at the government for protection. They probably would have been out of luck since all the federal politicians are very busy with the grandstanding circle jerk that is going on right now.

Washington Mutual

WaMu is the biggest bank failure in the history of the world.

That this rescue plan is not getting done is one of the biggest government failures in history. What are they waiting for? Is this really worth their 15 minutes of fame?

Did Congress and Senate notice that WaMu shareholders - your and my 401k plan, large pensions plans - got NOTHING? Value is disappearing. Jobs are disappearing.

I'm getting nervous. It's like a massive car accident is happening in slow motion and the drivers are choosing not to hit the brake. In this case, they're waving to the cameras instead.

Mike Pence

Is a tool as far as I can tell.

Mike Pence is a Republican Congressman from Indiana who is vehemently opposing the Paulson/Bernanke financial rescue program.

He, like many Americans, thinks the plan is designed to bail out American banks. Sweet Jesus.

He issued a statement last week, and was on CNBC tonight explaining to America how little he understands what is being proposed let alone what is going on right now. Oh wait, that's not what he was intending. That's what he did.

He is an attorney and a former talk show host. Oh really.

This grandstanding sophistry needs to end in a hurry.

GE Joins the Pain Parade

GE, mom and apple pie all cut numbers this morning for the quarter and year, citing generally weaker conditions. GE also laid out plans to further tighten up its balance sheet.

The futures, which were up for the morning, have erased their gains.

Can you get any more Main Street than GE?

If you are an active market participant you should make 2 lists:

1. Stocks you would buy if the plan passes in its entirety (GE may be a good example - their problems appear to be entirely due to credit-related conditions)
2. Places you can hide if it doesn't

Bush Last Night

“I find the greatest thing in this world not so much where we stand, as in what direction we are moving.”
Oliver Wendell Holmes

I thought Bush did a pretty good job explaining to the American people why we need to get this package done. This is the only important issue for the market until something gets done, or doesn't get done.

After I post this I'm going to poke around for a survey from last night regarding what Joe Public thought of the performance. As long as Main Street thinks that the government is bailing out the banks, the battle is going to be uphill.

Intrade is putting the odds at about 6:1 as of this morning that something gets done. A slimmed down plan is better than nothing but I'd rather not see the band aid approach.

Warren Buffett for President

Warren Buffet was interviewed for at least 25 minutes on CNBC this morning and after going over the rationale of his Goldman Sachs investment, was questioned at length about the Fed rescue plan. I know this won't happen but I wish that NBC would run the interview in prime time tonight, or in place of the national news.

Buffett is more fully behind the plan than most. The highlights as I saw it:

• The U.S. financial system was scarily close to melt down last week
• Every U.S. taxpayer will be on the hook if we do melt down
• The plan is the right one and has to be approved
• Paulson is the perfect guy for the job
• The Fed can actually make money on the workout if they do it right
• If he could borrow $700 million he'd consider doing it himself

Here's hoping.

I Actually Feel Bad for Paulson and Bernanke

“Nothing is more difficult than to introduce a new order. Because the innovator has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new…”
NoccoloMachiavelli, 1532AD

Today they go hat in hand to the Joint Economic Committee and the House Financial Services Committee to try to get this Hail Mary launched down the field.

I just heard a PA congressman compares the rescue plan to the plight of a blue collar worker in his state who was forced to take $2/hr less in order to keep his job. That isn't apples and oranges. It's apples and hand grenades.

Can I go hide out at Pinehurst or Bandon Dunes until this gets resolved?

So I'm Tired...

And I was at a boring Central NJ travel soccer meeting tonight when one of my partners texted me that Warren Buffet was taking a $5 Billion stake in Goldman Sachs. Hmm.

What I saw and heard of the Senate Banking Committee meeting today featuring Paulson and Bernanke defending the big deal was very disappointing. It's disappointing how we got here. It's disappointing that people don't appreciate the gravity of the situation. It's sad that politicos are angling to add pork at a time when our financial system is at risk. I thought at one point today that there was a very real chance that this deal will not get done and I haven't heard anyone offer an alternative. Not good although I think it will get done.

I applaud this Buffet move. I think that Goldman has done a fantastic job running the company for their shareholders. It just so happens that employees own much of the company but whatever. While earnings are down, they got their mortgage bets right and haven't lost money in any quarter through this storm. Buffet has a great track record even though he has made some less than stellar moves of late.

The thing I fear is that people who don't understand the Paulson plan, or why we need it in the first place are going to roll out of bed tomorrow morning and say something like, "If Warren Buffett wants to invest in the financials, why should the U.S. taxpayer be bailing them out?" People actually think the $700 billion on the table is going to AIG executives, or the Lehman/Fannie/Freddie retirement party fund or some other crap.

So, Goldman/Buffett had me feeling a little better about the world that is the U.S. economy tonight. Then the news came along that Yahoo has rekindled talks with AOL about a merger of their two failed web franchises, reminding me of how a once-great company can turn down the deal of a lifetime and shareholders and board members en masse will just yawn. Oh well.

An Old Story

WSJ is reporting that Vik Pandit at Citigroup has no idea what to do next so he is pissing off some of his top managers. Apparently he offered Sallie Krawcheck, according to some "the most powerful woman on Wall Street", some Ted job and she quit instead. I put the last thing in quotes because I really don't care whether you're a man or a woman. I want to know who the most powerful unicorn on Wall Street is.

I remember one time a few years back I was sneaking into NYC for an early meeting with a headhunter. If I remember correctly I was talking to someone about jumping from my long-only PM job to a big bad hedge fund. I got to the recruiter's office before it opened, as agreed for secrecy, and the doors were still locked but Sallie was in the lobby as well, most likely for a similar reason.

She: "Aren't you...?"
Me: "And you're..."
She: "OK, so I'm not here and you're not here either."
Me: "Sounds good. Have a nice day."

McCain Gets One Wrong

Presidential candidate John McCain was speaking in Scranton PA yesterday and the subject of the so-called bailout came up. I've said before and I'll say again that nobody is getting bailed out - companies are getting sold or going out of business. The government is doing its best to keep it orderly.

According to Bloomberg News, McCain insisted that under his watch, no Wall Street firm would profit from the plan or the workout. That's just stupid. The Fed or the vehicle that they create is going start buying up distressed debt in order to get the credit markets moving again. Wouldn't the like help in doing so? If the Fed bids 30 cents on the dollar for some bad mortgages, and Goldman steps in and bids 35 cents because they think they can make money, that is the best possible outcome.

Away from that, the Federal Reserve yesterday loosened rules making it easier for Private Equity firms and other financial buyers to take stakes in banks without themselves becoming bank holding companies. I guess they didn't run this one by McCain.

I Didn't See This Coming

Goldman Sachs and Morgan Stanley have gotten the Fed to agree to let them become some sort of bank holding companies. The U.S. Invesement Bank model is dead. GS and MS were the last two. From the Wall Street Journal:

"Becoming a bank holding company can help both Morgan Stanley and Goldman organize their assets, and puts both in a much better position to be acquired, to merge or to acquire smaller companies with insured deposits. It also may allow Goldman and Morgan Stanley to avoid using of mark-to-market accounting -- which forces companies to value their assets based on the current market price. Instead, these firm may be able to classify assets as "held for investment," as many banks do."

Returns will be lower going forward but access to Fed funding and higher capital requirements will make the short-side attacks of the last two weeks less likely. Retail bank desposits, money from people like you and me, are now one of the most-sought after elements of the new Wall Street business model.

Ryder Cup Press - Come On

It's not the coaches, it's the players.

The American players won. The European players lost. Better coaching can help but coaches can't hit the shots.

If there were individual winners, they were/are the U.S. rookies who played with fire and had fun.

It's About Time

Actually it's way too late.

The SEC announced yesterday that they would launch an investigation into the highly unregulated and sketchy use of credit default swaps. Wrote WSJ today:

"These swaps are insurance-like contracts that allow dealers, hedge funds and others to transfer the risk of corporate defaults to others. Sellers charge buyers fees to insure bonds and loans from default, and buyers can benefit if the cost of protection subsequently rises. "

So, let's say that Institution A owns lots of bonds and Fund XYZ own lots of bonds, both pools of bonds bought using leverage. If Institution A insures Fund XYZ's bonds, and Fund XYZ insures Institution A's bonds, both can take on more leverage and buy more bonds. What could possibly go wrong?

Ryder Cup Orly?

The U.S. team surprised everybody in day one of the Ryder Cup by talking a 5 1/2 to 2 1/2 lead over the heavily-favored European team.

Nick Faldo's coaching of the Euros seemed uninspired to me but after all he was coaching, not playing. That's right, he wasn't playing, although you may not know it by reading the British press, who are happy to lay the blame on the skipper.

On Faldo's decision to bench Sergio Garcia and Lee Westwood for this morning's match, the Sun wrote:

"It is a decision that beggars belief, a gamble that will either see Faldo emerge as an inspired leader - or a blithering idiot."

Maybe the European golfers should just go out and make some birdies.

*Scratches Head*

In the 48 hours since my last post I have been very busy, and when not doing something else trying to figure out what the hell is going on.

My take on the bets that the government has made:

• Backstopping JPM's takeunder on Bear via Bear Stearns debt - I'm OK with it given the suddenness
• Taking over Fannie and Freddie - had to happen but scary. The concept of a GSE with execs making fat cash and large political contributions should now be universally viewed as a joke
• Not taking over Lehman - the right thing to do
• Taking over AIG - very gutsy. I think taxpayer end up making money on this deal but this is a very bad precedent
• Implicitly changing Fed Funds policy this week - smart move
• This resolution trust-like organization - I still don't understand the scope. his is a very big deal on its own and give the very stretched balance sheet of the U.S.
• Temporary ban on short selling of financials - arrrrrrrrrrrrgh. Worst idea ever

History will be the judge of the players in this ball of wax that is being created.

I'm Outta Here

Tuesday Recap

Bernanke and company picked a good day to double cross the market.

The futures were pricing in a greater than 75% chance that the Fed was going to cut rates at their regularly scheduled meeting yesterday. Many were looking for a cut during the carnage on Monday. The Fed did nothing.

The market, preoccupied all day with AIG, sold off briefly after the announcement, then finished up on the day as optimism over some kind of resolution of the very grim AIG situation grew.

In the Fed statement they mentioned both the risk of slowdown and the continued risk of inflation, which is funny. The current risk of inflation in the U.S. is zippo. Unemployment is spiking, oil is down by a third. In tech land, Best Buy, Dell, Ingram Micro and Nortel have all reminded investors in the last 24 of how things continue to slow down.

My view is that this Fed wants to get back to using the Funds Rate to influence growth and inflation, not to situationally add liquidity to the financial markets. I expect that as the evidence of no inflation continue to trickle out, the Fed will cut rates.

The world is not ending but inflation isn't the problem.

AIG Is Getting Felted Tonight

Or close to it, in a market-friendly way.

AIG is not getting bailed out. Their balance sheet is so complicated that the Fed is going to help with an $85 Billion loan/financing/help in exchange for warrants which will represent 80% ownership (or so) of AIG when all is said and done. Giving away 80% of your company and control of your destiny is far different from being bailed out.

Futures are surging as further collateral damage is far less likely.

It turns out that AIG is too big to fail, Lehman wasn't. Putting aside the idea that Credit Default Swaps were a bad idea as used to start with, let's hope those that are too big to fail come under much greater scrutiny going forward.

Wall Street Journal

Today the WSJ unveiled its new layout for the online property.

I haven't played around much with it yet, but the funny thing is that it looks more like a newspaper than a web site. That's quite ironic and I'm not sure it's exactly what they were looking for.

It makes perfect sense for Barclays to step in and make an offer for Lehman's investment bank assets and people, which is the chatter.

Limit Down

I like that term although it's never good. Catchy though.

Most Asian exchanges have a limit to the maximum a stock can move in one day. After a stock hits that limit, it cannot trade again that day outside the limit. Period. If I remember correctly it's around 7% in most markets. "Limit down" has all kinds of implications, including the lack of liquidity if an investor is willing to sell outside the limit, and the lack of price discovery inherent in the halt in trading.

Asian markets are opening and most large financials over there are limit down. The Lehman and Merrill developments are shocking for sure, but this AIG balance sheet really needs to get unraveled in a hurry.

If one more charatan comes on the tube and says that either the Fed has been doing a wonderful job or that the U.S. economy is in wonderful shape, I'm going to start watching wonderful games shows.

Grand Theft Shareholder Value

I'll admit that I haven't been watching this story very closely, but Grand Theft Auto creators Take Two today walked away from what I thought was a perfectly good offer from video game giant Electronic Arts.

If that sounds familiar, if is exactly what Yahoo did with the Microsoft offer.

Take Two's stock was down 24% today and is now back to around where it is when ERTS announced its offer in February.

I have no idea how this was justified but if I owned the stock I'd be furious.

HEY!

Everybody is focused on the Lehman/Merrill destruction and the repercussions for the financials. How about the repercussions for BofA? I hadn't heard a peep about BofA or anyone else looking to acquire Merrill before yesterday. 24 hours ago I was pretty sure that BofA had a lock on Lehman.

Fast forward to now. If in fact BofA did make the decision to buy Merrill, with no government backing, in a single Sunday afternoon, one has to seriously question either their judgement or Merrill's. For the last year, Merrill has been unable to figure out how bad the balance sheet is. BofA had the balls to step in and make the bet that it's OK, and bet $50 billion of stock on it on the spot.

If the Merrill franchise is worth betting on, why didn't Merrill bet on it? Their stakes in Blackrock and Bloomberg, though not super liquid, are worth almost as much as Friday's share price. I don't get it.

Don't look now but oil is down another $4+ to $96.70.

long MER

Big Time Switcheroo

The WSJ and others are reporting that BofA has turned its attention to acquiring Merrill Lynch instead of Lehman. While I was playing golf today it looks like Barclay's entered the Lehman fray more prominently but wanted more from the Fed than they're willing to give. The Fed is willing to give nada still. Good.

It's looking more and more like investment banking/brokerage as a stand alone business is going the way of the dodo. The last man standing (Goldman Sachs) either needs to reconsider its structure or is going to come out as the big winner. I'd bet on the latter.

long MER

New Development

John Mellencamp, when nobody was watching or listening, (yes, nobody was watching or listening) switched from Rock to Country. Listen here.

Oh wait, I was going to write about Lehman.

No reputable news organization is in print yet as far as I can see regarding the Lehman resolution. Sounds to me as though:

1. Fuld is out
2. Lehman gets split up
3. Bank of America gets some of the best properties
4. The U.S. government has no exposure

W00t.

All or some of this could be wrong. We should know tomorrow.

I Just Got Schooled By WSJ

I was reading the Wall Street Journal online today, which I'm sure all losers do on Saturday afternoons.

I read the following and kind of laughed to myself:

The Federal Reserve Bank of New York held an emergency meeting Friday night with top Wall Street executives to discuss the future of venerable firm Lehman Brothers Holdings Inc. and the parlous state of U.S. financial markets.

I thought the word "parlous" was a typo, used instead of "perilous", and got through the weekend editors somehow. Not being perfect, I looked it up to make sure.

par·lous
Pronunciation: \ˈpär-ləs\
Function: adjective
Etymology: Middle English, alteration of perilous
Date: 14th century
Definition: full of danger or risk : hazardous

Oops. My bad.

So far I haven't technically made a Lehman Brothers post today.

Let's Get This Done

Potential Lehman suitors are understandably skittish as it has become evident that the government is not willing to backstop the debt in the same way that they did to get the Bear Stearns transaction done.

If I'm a potential buyer I'd naturally want every penny and every guarantee that I could get from Uncle Sam. Personally I think the Feds are doing the right thing by staying aside. The meltdown of Bear was sudden and would have had a major ripple effect throughout the system. Lehman had plenty of time to get a deal done but sat around waiting for a deal on their terms, when the common stock was telling you that things were very bad.

That equity investors today are negatively reacting to the same is another story.

The last men standing in this game are going to see material market share gains.

The American Auto Industry

I have never owned a U.S. auto stock. I have never owned a non-U.S. auto stock. I have never owned a U.S.-made car. I've rented one a few times.



The CEO of Ford has been on CNBC for what seems like hours, talking about continued restructuring, new models, blah blah blah. Is it bad for me to think that the U.S. auto industry doesn't matter to me? At all?



The term "too big to fail" has come back into vogue since the Bear Stearns smackdown. It feels like the U.S. auto makers are too big to change. They keep trying to change their models, change their manufacturing model, change their employee benefits, spin their non-core businesses and never really get anywhere.



Oh well.

Interesting Repub Discourse on Obama

I just read this, of all places, on a poker message board. I DON'T AGREE WITH ALL OF IT. I do think it's a thoughtful take on the last couple of months that has been in my opinion a big waste of money, especially the conventions.

How Obama Lost The Election

Obama supporters hate the fact that Palin basically has given the Republicans the ultra shot in the arm momentum boost that is going to win the election for McCain. She did it the same way Obama got his momentum, not thru any achievements, but through a great speech and hitting the nail on the head as far as relating to the American people. Say what you want, Palin basically beat Obama at his own game, and she is no idiot. Alaska is not like a tumbleweed town in Arkansas, and Palin showed plenty of moxie and strength to not only rise to the top position there, but also to have the state thriving, which is obvious by her huge approval rating there.Compound this with the fact the Obama camp has been their own worst enemy for several months now.
- Obama has acted way too pompous
- Made statements as if the election was already over
- Made his own presidential seal
- Used the ridiculous Greek columns
- Made complimentary statements to Pennsylvanians in that state and then turned around and blasted them behind their backs
- Made it painfully obvious that he was "centering" himself so as to try and play both sides of the fence on many issues....
- The Saddleback debate deeply hurt Obama. McCain came across as extemely Presidential with decisive answers - immediate and clear responses, while Obama came across horrible, with hesitation and evasiveness and the infamous "above my paygrade" answer about when life begins.
- I think the pig and the lipstick comment is the beginning of the end. Anyone could have and should have seen this would work against Obama, so the bad desperate advice is starting and the mistakes will get more desperate and bigger from here on out.

In the majority of the most recent polls there were some very telling stats. The independent voters were huge for McCain, and when asked the question if you needed advice for a serious problem in your life who would you turn to, McCain crushed Obama. Everything points to McCain being much more trusted that Obama, which ultimately I think lends itself to a much higher turnout for McCain. Why such a huge disparity in the trust department? We all know that answer.

McCain - crystal clear as far as his record - you may not like some of his policies, but it's easy to see he loves his country and has served it well.Obama - not so clear record, little experience, hence also the stat that much more people perceive McCain as a doer and Obama as a talker. Add to that all of the guilt by association issues with Obama, the radical ties etc.

Fair or not, when given a preponderance of circumstantial evidence people will assume guilt.

It all adds up to McCain easily winning in November.

Not a Happy Anniversary

On September 11, 2001, I woke up in the Palace Hotel in San Francisco. I was out there for the Lehman Semiconductor Conference.

When I woke up the TV was playing some action movie. I switched to CNBC and saw the same scenes. Not an action movie. 9/11. I quickly showered and went down to the conference where everyone was standing around in awe.

I was stuck in San Francisco longer than the airports were closed because my company's phone system was down and I didn't know it. Some conference attendees a actually rented cars and drove back to the East Coast. Lehman rented buses for some of the others. The events of the day gave everyone a lot to think about.

The efforts to make us safer may be helping. Some subset of Americans trust foreigners far less than before. Everything is different.

Cheers to those no longer with us.

Is It Me or This Market?

Usually at 6:30 am I have tons of market-related reading still to do. Most of it I find interesting or at least edifying.

At 6:20 I was reading the following:

FOND DU LAC, Wisconsin (AP) -- Talk about a Big Mac attack! Don Gorske says he has eaten 23,000 of the burgers in 36 years.

Story Highlights
Don Gorske says he has eaten 23,000 McDonald's burgers since 1972
Gorske eats two a day, compelled by his obsessive-compulsive disorder
He also orders two parfaits a day, and fries once or twice a month
Gorske says he keeps himself in shape by walking 10 miles a day

Is anyone having fun yet?

Shhhhhhhhhhhh

There is nothing new this morning as U.S. market participants await the Lehman announcement at 7:30. Lehman will also give the market an early look at its quarterly earnings numbers.

It's possible that we get a post-Bear-Stearns type of rally, but only if there is a big resolution to this Lehman issue. The WSJ speculation today pointed to some possible smaller moves which won't get to the answer.

Lots Going On

Lehman was down 45% today and will announce something tomorrow morning. They kind of have to.

Oil was down another 3% to $102. No announcement needed. The long-side speculators are gone and it is going lower for now.

Look for more hedge funds hitting the showers over the next few weeks. This market is very difficult and not much fun.

Market Figures It Out

Lots of folks were thoroughly disappointed in the market yesterday.

Everything opened up big, then everything except the banks sold off some. The NASDAQ was actually down intraday at one point. In the end, the stock that will benefit most and soonest from a better housing market did well, everything else didn't do a lot.

Under performing on a big up day is not a nice feeling. It's like not being invited to one of the best parties of the year. If you own Apple and Google, which were both down on the day, you might not have made any money at all. Investing is a long term game. Hang in there.

The futures are strong again and oil is down a little. Hurricane Ike might miss the oil complex in the Gulf. Not a bad start.

Fannie and Freddie are Done

Stock markets worldwide are moving higher as news of the U.S. Government seizing control of Fannie and Freddie is digested. Have we now officially passed the low point of the mortgage mess? Maybe.

I object to this being called a bailout, since current shareholders in the common stocks will likely get nothing. These two institutions aren't being saved, they are being killed.

Oil and the dollar aren't doing much at all as the focus is clearly on financial stocks. A straightforward rally would be nice for a change.

College Football

I don't know a ton about college football but I just heard on ESPN that Penn State paid Oregon State $800,000 to come to State College, PA and play football yesterday.

New Jerseyans are regularly outraged that the 2 highest paid state employees are the Rutgers men's football coach and women's basketball coach.

I get that these programs make money for the schools and help subsidize other sports, but it's got to stop somewhere. Wouldn't most schools go to Penn State and play for free?

We Have a Weather Problem

Tropical Storm Hannah received almost as much coverage this week as the Republican Convention. She was supposed to blast New Jersey yesterday with a vengeance.

It blew hard for a couple of hours and we got lots of rain, but it was no big deal.

I've come to the conclusion that we don't have too many storms, we have too many media outlets looking for weather-related news.

The NFL Owns You

Today's story within a story comes from the NFL courtesy of Chad Somebody-or-other.

Chad is a superstar wide receiver for the Cincinnati Bengals with a flair for the retardedly dramatic. In 2006 he was fined by the league for wearing a jersey with the words "ocho cinqo" (his number) on the back, rather than his name. This past off season he did what any reasonable human being would do after a year or so of thought, he changed his last name to Ocho Cinqo.

CNBC's Darren Ravell interviewed NFL Commissioner Roger Goodell this week. When asked about Chad's name change, Goodell said, "We just approved this yesterday."

Attention NFL players: you can legally change your name but it's not official until the league brass approve it.

Bottoms are Only Visible in Retrospect

That said, the fact that the Fed is close on resolving the Fannie and Freddie mess, as reported today by the WSJ and others, seems like a big deal. It's not my first choice for the government to be the owners of these properties but there's a good chance that the right operators can clean up these balance sheets and actually make money for taxpayers on the deal. Investors have short memories.

The Misery Index, a highly unscientific sound byte generator, is calculated by adding the unemployment rate to the inflation rate. The index hit its highest level in the last 18 years this week. I will be surprised if this indicator moves much higher, just because the recent fall in commodity prices has to have alleviated the inflation problem. If the mortgage mess gets cleaned up and the banks can start lending again, a better job market can't be far behind.

Nokia

Negative preannouncement on the tape.

Yuck. Good thing the Euros are worried about inflation.

Huh?

A story on Marketwatch this morning is musing that this week's market weakness may be a sign that investors are pricing in a Democrat victory in November. And they don't like it.

Huh?

As far as I can see, Palin kicked butt. McCain was nothing to write home about but that was just last night. InTrade has Obama's lead shrinking this week.

Lots can happen between now and November.

Dell is Moving

Out of all its manufacturing facilities.

The WSJ and Bloomerg are reporting that Dell is and has been in talks to sell all its manufacturing facilities. The trend to outsource the manufacturing of technology hardware has long been in place, but Dell has partly resisted. I thoughts they viewed manufacturing and the logistics around it as a core competence.

Apparently a broadening product line and the fact that they are now selling through retail prompted to move. They might be right.

Dear Stock Market

You have made us all unhappy. I know that's your job.

Good work. Stop it.

The End

Comcast Strikes Again

I am a Comcast customer for cable and cable modem. I have 2 set top boxes. One with DVR in the family room and one older model in the playroom. We are not a tv-in-the-bedroom type of family.

This morning I was watching CNBC and the screen displayed the message "This Channel Will Be Available Shortly".

I turned it off and on, tried another channel, unplugged the box and plugged it back in. Rocket science, I know. Nothing. I checked the other TV and it was working fine.

I then called 1 800 COMCAST and got the "service problems, lots of call volume" message. After being on hold for about a minute, they disconnected me.

Next I went to Comcast's web site and tried the live online chat. I got one dude who chatted to me that he was the wrong dude and said that he's transfer me to the right dude. After waiting about 5 minutes I was disconnected from that.

The have some sort of automated Q&A troubleshooter called EVA. Eva is not too smart. That didn't work.

I clicked on the email Comcast link, filled in the boxes and typed my concern but much to my chagrin, there was no SEND button.

I came into the office and called the 800 number again. This time the message said there was a service outage in the area and would I like a call when it is restored. Sure.

My cable modems works. One of my set top boxes works. The other one stopped working as I was watching it.

This is one funky service outage.

Yes, I'm writing this in the hopes that someone form Comcast reads it. Please please please Verizon get FIOS to my house soon.

Peace.

edit: It's back on

Hedge Funds 101

There were a few lessons to be learned this week in hedge fund land.

Ospraie Fund, the world's largest commodity hedge fund, shut down on Tuesday. Ospraie and similar funds have in my opinion been big contributors to the volatility in the commodity markets over the last two years. I have said before that I don't even think that commodities are an asset class, they're just stuff with a clearing price set by the market, but hedge funds can go wherever they like so whatever.

Ospraie, which ran about $10 billion earlier in the year (according to some reports, I don't know) , was down to $4 billion by the end of August having lost more than 25% of its assets in August alone.

Lesson 1: If too many folks are doing it, it's going to be really wrong when it goes wrong. The long commodities, short stocks/dollar trade was very crowded.

Lesson 2: Narrowly-focused hedge funds that use leverage carry a level of risk that is unquantifiable until things go bad.

Lesson 3: If you own a hedge fund that has a bad quarter, you might as well sell. Now with this fund shutting down, investors have been told that it may take 3 years for all the money to be returned.

Be careful out there.

Google's Trojan Horse

Google's new browser announcement yesterday wasn't a browser announcement. It was a web-based operating system announcement, and Microsoft has a big problem.

Henry Blodget over at SAI is absolutely killing this story this week.

If I'm right, Microsoft is going to need to bring out some serious Ninjas to fight this one.

A Little Tip For You

If you ever get up in the morning and need a quick peek at what the important bullets are for U.S. business today, go to the first page of the U.S. version of the Financial Times, here. The online version, obviously.



Whoever it is who decides what 6 or 8 stories are highlighted on that page has a very good feel for what is going on over here.



It was a tough day yesterday as stocks opened up big with oil down and Gustav relief palpable. In my opinion, the broad market couldn't stay up with commodity names getting hammered.

Good News For Stocks

Individual investors are giving up.

According to a study by the Conference Board, individual ownership in shares of U.S. companies has hit an all time low. Indifference is the last step before recovery according to some famous construct that Google and I can't come up with at 6:30 AM.

Anecdotally this is so true. Nobody wants to talk about stocks any more. Not on the golf course, not at parties. CNBC would rather talk about politics or storms.

I'm sure it's cyclical and have no idea how long the cycle is. I'm also sure that from these levels some better than expected good news (not less bad than expected news) will move stocks higher.

The futures are happy. Could be a good day.

Oil and Rain

Apparently we have enough of the former relative to current prices and Louisiana didn't get too much of the latter. Not to make light of a natural disaster but preparedness and a lucky lessening of the storm means that not much damage was done.

Oil is down 7% to around $107 as speculators run for the doors. Maybe I'll keep my SUV after all.

In the business headlines today, Google is rolling out its own browser and Lehman may actually be getting a bid from Korea after all.

Canadian Golf Legend in the Making

Good luck to Stiffer who tips it up today in day 3 of a tourney in the Great White North. He's in the final group, 1 shot behind the leader.

Good luck my friend.

Good News Gustav, Relatively

Gustav has been downgraded to category 2 and oil is down 4% on the day.

Separately, someone from OPEC just said that oil is now in oversupply and $100 per barrle would be "acceptable."

Sarah Palin

There are several excellent levels developing in the McCain/Palin ticket news extravaganza. This one, reported by the Washington Post and others, including Xeni over at Boing Boing, is juicy:

"Just hours before McCain declared his veep choice of Alaska Gov. Sarah Palin, her Wiki page saw a flurry of activity, with editors adding details about her approval rating and husband's employment. Perhaps more tellingly, some of the same users editing her page were almost simultaneously updating McCain's Wiki entry, adding information dealing with accuracy, sources and footnotes to each."

It goes on to say that other profiles were being edited as well but I didn't even think she was in the ball park before the annoucement. Somebody did apparently.

From the NY Times, implying that she or her camp were behind the edits:

"While ethically suspect, the idea that a politician would try to shape her Wikipedia article shouldn’t come as a surprise. In modern politics, where the struggle is to “define” yourself before your opponent “defines” you, Wikipedia has become an important part of political strategy."

Democrat critics are happy to say that Palin is there to deflect attention from McCain so that he and his old boy war mongering buddies can slip into the White House unnoticed, sort of.

It's surprising to me that there is a female sex symol in a U.S. Presidential election. Yes, a sex symbol. I think she's an attractive lady but I've been on the Web for that last couple of hours and tons of guys think she's HOT. Smoking.

Is that worth some votes? I'd think so.

Oil in Real Time

It's interesting that the price of oil took a big dip in the last hour. It was trading up on the session then rolled over and is nos down almost 1% for the Euro day as 6:55 EST.

Here's my take: U.S. East Coast traders are getting out of bed, holiday or not, and deciding that Gustav is not going to be as bad as feared. Gustav is less that 100 miles from the Louisiana coast and doesn't look yet like it's going to be Category 4 or worse.

It still looks bad but let's avoid the worst.

Rebublican Convention

As the worst storm of the year bears down on the most-often battered part of the country, the Republicans have taken the half step of cancelling day one of the convention.

"This is a time when we have to do away with our party politics and we have to act as Americans,'' John McCain, soon to be the official presidential candidate, said Sunday from St. Louis. ``We are going to suspend most of our activities tomorrow, except for those absolutely necessary.''

This is all very annoying. None of the convention activities are absolutely necessary. The whole convention process is absolutely unnecessary in this day and age, and a waste of money. Now we have one that is scheduled to run in the middle of the most telegraphed naturals disasters maybe ever and the Repubs can't quite decide whether they should cancel it.

American politics stinks