Congress is already getting some heavy duty anxiety about the high unemployment rate and the upcoming election. The most alarming element of this is Congress may attempt to get some short term job spikes before the election in a misguided attempt to prevent a voter backlash. i.e. Lots of short term social programs that will disappear as soon as our borrowing from China runs out.

What would be the best form of stimulus? The best thing Congress could do to create jobs and make America more competitive would be to fund the conversion of the nation's auto fleet to natural gas. We are currently flooded with a glut of natural gas int he United States with over 100 years of supply discovered right here domestically.

So Alwaleed is out with comments about how "mature banks" should have known that Dubai debt was not the same thing as sovereign debt. Hey isn't it too bad the US government didn't know the difference either in the last debt crisis? Instead debt holders in US banks were made whole by the US taxpayer.

Isn't the hidden message here "Hey don't expect us to bail out you out like the British and Americans did, we aren't made of money"? Part of the reason our own recovery will be so shallow is because we have such a high debt burden instead of forcing writedowns. Maybe at some point we can have a mature financial system like Dubai. More from Bloomberg:

There has been some Interesting performances by oil in the context of world financial markets and industrial activitity worldwide over the last six months. For the last four years, our own model for oil prices has not been terribly bad. However, right now the model has us at about $89 dollars with an extended run up into $110-$115 or so. Oil is nowhere near doing that.

So we've got some sort of "not knowing what we don't know" going on. What could be the big factor that we are missing? Most likely in this case it's politics. Specifically the confrontation between Saudi Arabia and Iran over leadership in the region.

Is the communications market going to be leading a rebound in venture returns? I think the sector previously written off for dead will surprise people as bandwidth demands escalate against infrastructure. When I talk to institutional investors, they are almost exclusively negative on communications as a money sink. I'd argue the sector has been underinvested for too long and the mobile web will drive general as well as application specific demand beyond current networks. We'll see.

Lifesize Communications' sale to Logitech (LOGI) is a nice exit from a company started in 2003 by Craig Malloy. I am fairly sure Venu Shamupant from AV put that deal together. Venu is a solid thinker without all the ego (rare and impressive combo) and congratulations to both him and Craig for a fantastic exit. Looks like the two of them are single-handedly bringing back communication exits as well as some life to the Austin tech market.

Jason Calcanis and others are out with posts talking about Rupert Murdoch's comments suggesting he will opt out of Google (GOOG) Search. Jason amplifies the comments and talks about doing a deal offering WSJ articles for a premium.

Every internet age (which last about 5 years) has a king. Right now it's Google, and it can be a difficult company to deal with. The bottom line for me, though, is that I love what Google does in terms of making the internet useful and interesting, especially for mobile users. I've been using Google Maps and Gmail for years and they are the best in class in terms of usability and usefulness.

Three upcoming investment themes for discussion:

• Policy shift into natural gas by Congress may become more likely with a return to even mediocre US growth and rising oil prices. Also as the dollar drops, oil becomes less affordable and a domestic solution is needed (priced in dollars and produced 100% in America). With massive budget deficits, huge natural gas discoveries in the US driving prices down, and an urge by Congress to "create new jobs", this may be a policy action whose time has come. The economic and national security reasons for this action might make investments in this area start to pay off. A bill to provide for infrastructure for a conversion of the US trucking fleet to natural gas should start to get a lot more support. As that shows success, a follow on to convert the auto fleet may be possible. Autos and trucks account for 70% of all US oil imports. Natural gas is the one solution that can solve our oil problem. Huge discoveries in North America and elsewhere make a transition to natural gas for trucks, and then eventually cars, a much more viable solution for our oil dependence. At some point as oil starts to rise and the disparity between the two increases, I think we'll see much greater investment in natural gas. Investment wise this one can look at plays that own natural gas in the US, as well as exploration, and more speculative bets like Clean Energy Fuels (CLNE) and Westport (WPRT) which makes engines that use natural gas.
• China is due for a hiccup. Lots of stories leaking out about increases in bad debt. Does this mean I think China is due for a huge drop? No, but there are macro problems with excessive lending and an imbalanced currency. Through this crisis we have had the Chinese currency fixed to the dollar. As the dollar drops, this kills Europe and Japan. The Chinese either have to start to revalue higher, or pressure on the ECB and the Japanese will become politically untenable. You can't have a fixed rate regime in the world's third largest economy with major imbalances created (again). Something's got to give. If Warren Buffett wants to buy a railroad, I like Australian plays better than US plays.
• Health Care. Stocks were up on elections. Don't bet against a bill here. Use today's uptick to get out. I prefer to stay out of the sector--but I know quite a few hedge funds that go in whenever hype is high, then go short when hype is low. I prefer to stay clear of musical chairs for a song that I am fairly sure I know will end badly for the insurers.

Disclosure: Author is long APC, DVN, CHK, WPRT, CLNE and looking for more as a long term play.

Call notes on upcoming phones from Sprint (S). Wow what a roster of truly mediocre phones. Their Android phones look heavily dominated by HTC which makes phones with great specs but they almost always feel tacky and flimsy (I rarely return gadgets---but I returned the first HTC phone I had).

• My prediction for Fed tightening is around the summer of 2010.
• As long as we keep getting positive GDP reports, (over 2%), the Fed will continue to remove programs construed as "Quant Easing" and other supports and guarantees for the banks.
• The most critical factor in constraining inflation, is government deficit control. The White House will move seriously on the deficit in the middle of next year to preempt the election. Deficit reduction will be a big part of the dialog otherwise. The Democrats will lose large numbers seats but nowhere near enough to lose control of the House unless the economy goes down for a substantial double dip (rather than flat line).
• My gut on GDP is one to two more strong GDP reports followed by a flat line for a lengthy period as debt is serviced and repaid. We are just putting a small layer of flesh back on the bone. i.e. Very surprised if we get a traditional V--we should just get back the excesses of the panic in Q4/Q1.
• If we started to actually see an increase in jobs, we might see more pressure on the Fed to act a lot earlier. That's my 20% upside scenario. Earnings in tech and financial have been great but most of that is on cost cutting, not top line surprises. It would take quite a bit more growth in the economy than 2 quarters to get managers to hire again.

Josh Kopelman has a great post on the future of venture investing. Basically, more funds but much smaller in size. All I can say is I Hope that is what is going to occur.

I've been hoping for that since the tech wreck but I've been surprised how quickly institutions just plow money back in and back up the truck for a world of more hurt. I've been incredibly early in this view. Early is just another euphemism in the financial word for "wrong". So even though I see these clarion calls now for a shrinking of returns, I have this nagging voice that says institutions will rush back into the asset class in 18 months once the Fed is done inflating. Time will tell.

Kedrosky points out this piece on the FT that argues that the regulators did not cause the problem in the financial system and uses the analogy of the rhetorical "Do police cause crime?"

We had rather stringent bank regulation for 70 years, and we unwound it in uneven and impractical ways. The result was several nasty bubbles one after the other with the most dangerous being the real estate bubble. I agree that regulation should not prevent failure- but it should be designed to make that failure less widespread and prevalent.

Nice chart from ChangeWave showing Apple (AAPL) challenging RIM's (RIMM) market share. Been negative on RIM for a while and I think the share losses will continue--not just from Apple but most especially Android.

Click to enlarge:

Lots of trepidation about what Barney Frank and the White House will do to constrain the new mega banks. I find the idea of using tax payer guarantees to fund risk-taking relatively bad long term policy. Going back to Glass Steagall in some form continues to make a ton of sense to me. The difficult question relates to what activities do you firewall? Do you allow commercial banks to syndicate? Are there some financial innovations that should be allowed in commercial banks that were previously not allowed? Where do you draw the line? In terms of "investment banks, what is the yard stick these should be regulated by? How big does an investment bank have to be before it becomes "systemic"? Is leverage the best measure of systemic risk? Should it be the only one?
Via NYTimes:

Congress and the Obama administration are about to take up one of the most fundamental issues stemming from the near collapse of the financial system last year — how to deal with institutions that are so big that the government has no choice but to rescue them when they get in trouble.

So the specs on this phone are promising.

Great screen, somewhat mediocre processor, but fantastic otherwise and based on Google's Android OS. It's great to see Motorola (MOT) come out with a device that's competitive. Apple (AAPL) has pretty much stopped innovating because the IPhone is in "fat and happy mode." With Android, I think we are starting to see a little heat and a bit more of a competitive field.

Engaget is running a story about Intel (INTC) dragging its feet on USB 3.0 which implies some antitrust issue. I am not sure whether it is an antitrust issue or not, but I think enforcement has been a bit too lax in the last decade. More pointedly, I'd like to have USB 3.0 now as a feature on my computer.

Also, looking at the new laptop chips from Intel, I find myself a tad perplexed. First, the chips generate a lot of heat at 35w and 45w, respectively. I'd rather have 32nm architecture with less cores at 35w max on the high end. Second, a lot of applications don't really take advantage of multiple cores. Third, what the hell is going on with NVIDIA (NVDA) and Intel? NVIDIA has raised the stakes by stopping development while the case between the two is worked out. My gut here is telling me that Intel is using advantages in one side of its business to keep competition from NVIDIA out of the market.

Pretty breathtaking drop in Nokia (NOK) yesterday as it was down 11% in one day. What's going on here relative to big market share shifts?

Speaking generally in terms of industry growth and decline, big market share shifts in specific industries don't typically reverse quickly and usually they never reverse. Once trends stabilize, it takes quite a bit of time to see any rebound in lost share and usually the "victim" either exits the business or solves the problem with an acquisition.

Bank earnings so far have been great.

I've been pretty optimistic about tech businesses, even during the darkest days of this depress-let.

No question, companies like IBM (IBM) and Oracle (ORCL) have evaded a lot of the collateral damage of delayed spending that some of their tech brethren have suffered through. Intel's (INTC) earnings were great yesterday but they definitely have had some choppy quarters that it seems Oracle and others like it have avoided. In the past, I've been long Intel, Microsoft (MSFT) and the chip/networking companies which provided past gains but also quite a bit of volatility "riding it through."

I hear the rationale for folks in cash or treasuries and I absolutely understand where they are coming from. A lot of the fundamentals are very negative and the fiscal and political situation looks like it's going to get worse before it gets better.

Who could blame you for putting all your assets into treasury bonds or cash and running for the border and bribing the border guards. But that hasn't been working well has it? You see the market going up and you want to get back in but you don't understand what went wrong in your mushroom cloud trade. Hey, you are not alone.

We have spent the larger part of the last year focusing on how to fix health care, but no plan on the table actually fixes it. What’s the underlying problem or more appropriately, what’s the underlying disease we are fighting? Are we sure we know what has gone wrong and where?

To figure out what’s wrong with healthcare in America, it might be helpful to diagnose the problem just like a doctor does. One of the first things a doctor does when he diagnoses a disease is he looks at the symptoms the patient is demonstrating. Why not approach it the way a doctor would? What are the symptoms we can take note of to identify the cause of the disease?