Jeane Roberts wrote a frustrated account of the fall of AIG (AIG), pointing out the amount of public money going the rescue of various financial institutions (except Lehman Brothers (LEH)).

Personally, and for my net worth, I'm disappointed that Lehman (LEH, LEHPQ - $0.30) didn't get rescued. As an ex-employee and shareholder I would have liked some of the public money Ms. Roberts mentions being thrown around for Lehman. It was the last place I worked and its collapse hit me hard.

Thornburg Mortgage (TMA) has changed their bylaws to allow large shareholders. It seems that CEO Larry Goldstone is really going to save this company. I admire him for being honest about the condition of the company and its margin calls back when the whole mortgage market started to melt down. I'm willing to make a speculative bet that he will be able to keep Thornburg Mortgage solvent but at a very dear costs to equity holders.

But just in case, I'd rather buy the preferred stock (TMA_PRC - $4.59, TMA_PRD - $4.55). I'm assuming preferred would still have some value in a liquidation. If there is no liquidation and the company is saved they could return shooting distance ($19.00ish) of the par value of $25

Today the Chicago Fed released notes on the economy showing a decrease in U.S. economic activity to the lowest level in five years.  This indicates the recession may have already begun.  Watch for more recession news to end this stock market rally as analysts look for earnings decline. 

I'm taking some profits on some of my financials into this rally a bit while nibbling at long term bargains like United Technologies (UTX) and Apple (AAPL).  I think I'll have a chance to buy UTX and other industrials in the next few months at better prices as well.

I'm looking for Wall Street to do well no matter who wins the election this year. 

 Three factors will keep the cash register ringing for investment banks:

I've been getting the inside scoop from some hedgefund traders (who always request to remain anonymous). One told me that the reason Bear Stearns (BSC) is trading so far above the deal price with JP Morgan (JPM) is that bond holders who NEED the deal to go through are buying millions in equity to save their billions in debt. The will eat the difference between where they buy the equity and $2.00 in order to protect much higher numbers in debt. Also, the equity acts as a nice hedge. If the deal does not go through, Bear Stearns equity will go up a lot and the bonds will go down.

JP Morgan's Jamie Diamond is extracting his pound of flesh from taxpayers (no one represents them) and equity holders in order to guarantee the debt of Bear Stearns.

Fellow The Panelist contibutor Eben Esterhuizen asks and clearly answers "no" to the question, "Will Recession Lead to A Solar Depression? " To take Eben's analysis a little further, I thought I'd delineate the factors that do affect the solar industry. Every investor should have an opinion about this list before throwing money after lofty hopes for a clean energy revolution.

Factors affecting the viability of the solar energy industry (in order of importance):

Exxon (XOM) gets slammed by the Union of Concerned Scientists for trying to suppress science on climate change and hurt the planet for profit. See ThePanelist NewsFlash. I had a link to the ExxonMobile response but they seem to have taken it down from their website on Corporate Citizenship.

I want exposure to the oil, gas and energy industries. Energy will only get more important as China and India continue to industrialize and become consumers. But Exxon is not the best way to play this exposure. At a p/e of 11.1 and a growth rate no better than other huge oil companies I can find better value and better morals (if only slightly sometimes) picking other energy companies. The oil companies and the trailing P/E ratios of companies I do own are as follows:

Ashkan Karbasfrooshan writes about a potential sale of Yahoo (YHOO).

But with a market cap of $33 billion (minus $2 billion in cash) that doesn’t leave many potential buyers with enough market cap to swallow Yahoo. All the buyers/partners that are big enough, like Microsoft (MSFT) and Google (GOOG), are already competing with Yahoo, so they aren't really buyers. I think the sale could happen, but at a lower price. A potential sale/merger puts a floor on the stock, but I don’t think it provides much upside.

Mike writes: I have a question regarding Ford Stock -- I see you
purchased Ford Stock years ago -- what is your take on the future of Ford?

Dear Mike,

With reports of retail spending up this year, even in the face of so much bad news about housing and mortgages, my inner contrarian awakens. I'm terrible at picking specific retail trends in terms of what brands are in fashion. I do not trust myself to pick the next American Apparel (APP) ($14.90) or Abercrombie and Fitch (ANF) ($81.25) so I narrowed my search to broad based retailers and then looked for the ones trading with the cheapest valuations. I also looked for retailers with a history of growth that are trading on the low end of their historical p/e ratios.

I came up with two retailers, one at each end of the spectrum: high end department store Nordstrom (JWN) ($35.12) and box retailer Target (TGT) ($51.85). I bought them both but did so at less than half of a full position.

The phenomenon of closed-end funds getting cheaper at the year-end and rebounding is another type of January effect that is well known but not without risk; it is well known and yet it continues to exist. Part of the reason may be that the lack of liquidity keeps any hedge fund and bank trading desk from taking advantage of it. I know that there are funds that engage in closed-end fund trading strategies but there always seems to be room at year-end for this one to work.

I've been buying fixed income closed-end funds at a cheap, but by no means unprecedented, 13-15% discount to NAV (Net Asset Value) this year-end. The cheapness usually disappears with the changing of my calendar to a new year and that is when I take profits. I will exit this trade based only on the cheapness of the funds to NAV. I risk the bond market falling (interest rates going up) or the bond portfolios underlying the closed-end funds collapsing for some other reason such as credit concerns or a liquidity crisis, just as we have seen this past quarter. And while they carry bonds that are greater than normal because some funds are leveraged, they also carry  yields from four to seven percent that are nicely at or above the Fed Funds rate.

We know that coal and petroleum companies are mining the raw materials that contribute to greater levels of CO2 in the atmosphere, but who else is contributing? Surpisingly, agriculture, as Mike Brune from Rainforest Action Network [RAN] says:

We launched a major new campaign taking on giant Agricultural companies ADM, Bunge, and Cargill for violating human rights and clearing rainforests to make way for massive soy and palm plantations. Clearing tropical rainforests for plantations, what we call agri-sprawl, generates more than 20 percent of global greenhouse gas emissions. This is the reason why Indonesia is the world’s third-largest source of greenhouse gas emissions, and Brazil is #4.

Number one and two for now are The U.S. and China, respectively, but that order is expected to reverse soon. I find it very interesting that the top two countries are digging up hydrocarbons stored in the Earth's crust and burning them, while Indonesia and Brazil are burning hydrocarbons (wood) sitting on the surface.

Felix Salmon at Portfolio.com dug up the ratios for how many level 3 assets at each major Wall Street broker. This ratio is seen by some to be "scary". I don't find it as scary as some. The assets in Level 3 are mark-to-model. Some of these could include complex derivatives for which there is no market that exactly hedge assets for which there is no market. Hence the risk in a panic liquidation is high but there is little cash flow risk. There markets are worried about some of those with the highest ratios of Level 3 assets to capital. Personally, I trust the risk managers at firms like Goldman Sachs (GS) ($212.89), Morgan Stanley (MS) ($50.88) and Lehman Brother (LEH) ($63.03) to be able to correctly value these situations. I do believe the market will continue to focus on this ratio which will encourage firms to try to move more assets out of this category.

Disclosure: I own GS, MS and LEH. I am vested in the executive compensation plans, executive option and pension plans at Morgan Stanley and Lehman. I am a former managing director at Morgan Stanley and Lehman. I have traded (bought and sold) GS, MS and LEH in the past year.

Starbucks (SBUX) $21.20) came up on my year end tax selling screen so I decided to take a look at its valuation. Everyone loves to hate Starbucks. The stock as been on a one way ticket to hell falling nearly 50% from its highs created by what I'd like to call the Starbucks Bubble). In my experience, when stocks go down like this (deflating a bubble) the stopping point tends to be a 50% drop.

Together with Madonna, Sting and Prince, Vikram Pandit, my old boss at Morgan Stanley (MS), has acheived rockstar status. He's the only CEO I know of in the world who is referred to only by his first name.

I did a lot of trading this November. I haven't been disclosing all my trades along the way, but hopefully some of the changes in my top holdings will give you an idea.

1. Berkshire Hathaway (BRK.A) - Up from #3. Wish I owned more. This just keeps going up huge. The stock is benefiting from the earnings momentum in Property and Casualty insurance, plus it's considered a safe place to hide given Warren Buffett's dislike of complex derivatives.

Throughout the mania of the expansion of the moneyed class in China, I've watched the gambling stocks with the frustration of "I should have seen this coming" as Las Vegas Sands (LVS) ($118.76) made its meteoric rise. But for much of this year I've been thinking that the gambling stocks were overvalued, and didn't want to short them until I saw a catalyst that would drive them down. Perhaps this Barrons article that focuses on Las Vegas Sands, Wynn Resorts (WYNN) ($134.50 ) and MGM (MGM) ($88.62) is it. Judy Weil, Seeking Alpha editor, provides a nice summary. If you want to read the actual article at Barrons.com, it will cost you.

I do think gambling will continue to have a great future for those who invest in it. As I heard Charlie Munger say at the 2007 Berkshire Hathaway shareholder meeting, gambling is a tax on the uninformed. But heck, the uninformed just keep getting richer. For now, these gambling stocks with a Chinese connection are way ahead of themselves. They are pricing in google-like growth rates in earnings. I do not think they will see that type of earnings growth, which can only mean that stock prices have to drop to meet reality.

On Wednesday, I was positive on John Thain as the new CEO at Merrill Lynch (MER) ($56.11). I was also a buyer - so I bought a little. But now I'm holding off a bit.

I still think the fact that John Thain got to look at the firm's books and still wanted the job means that there is probably no huge surprise write down coming. Remember this guy grew up at Goldman as a mortgage trader and knows all the trader tricks for hiding losses in a mortgage/CDO trading book.

Well, it turns out Joe Capone was wrong after prediction to me months ago that John Thain would run Citigroup (C) after Prince was fired. But he's not that wrong, because after watching Thain's interview on CNBC I'm sure he was offered the job and chose Merrill (MER) instead.

Knowing that Thain worked in Mortgage Backed Securities at Goldman and the fact that he got to see the books of Merril before he took the job are two factors that made me buy Merrill Lynch (MER - $57.88 close) in the aftermarket today at $58.15. I don't think Thain would have taken the CEO job at Merrill if he didn't figure out that the mortgage positions there are manageable.

A reader asks:

Hi David,

How does an average guy like me with an Ameritrade account take advantage of the Canadian Dollar rising (13% since September). Are there any currency products that are traded? Also, can I short the dollar at the same time?