Wall Street Str...'s  Instablog

The hearings are better than I expected thus far. Sure, questions are painted in certain ways to manipulate the answer and prevent a self-incrimination. But some good information is coming out of the Q &A session. At this point, I don't see where anything will change with respect to those that came in hating banks and those that came in thinking there was more to the economic collapse than poor risk management on Wall Street. The absence of blowhard politicians is a welcome break. I can't say that I'm impressed with the answers, although it's obvious the guys in the hot seats don't want to rattle too many cages. So, Fannie Mae and Freddie Mac were part of the problem not the repository that enabled the dastardly behavior of the Street.

I think that Lloyd Blankfein (CEO of Goldman Sachs) is still explaining what a market maker is and Jamie Dimon (CEO of JP Morgan) threw them off the scent early with his mea culpa out of the gate. Here are some other quotes that struck a cord with us.

Much of the morning it seemed that the Feds were trying to get the CEO's to admit that they knowingly hurt the economy. In response to many of the big questions, the bankers are sticking to free market principles and its getting the Feds fed up as follows:

• Bankers on Systematic risk: "we support the broad economy"
• Blankfein on risky securities: (interrupting panel chairman Phil Angelides) "These are professional investors who want this exposure. Even today people are coming to us for exposure to these very instruments"
• Dimon on employee pay: "They have been and remain appropriate."
• Blankfein on systematic risk: "The system clearly needs to be structured so that private capital, rather than government capital, is used to stabilize troubled firms promptly before a crisis metastasizes."
• John Macke (Chairman and former CEO of Morgan Stanley) on taking risks: "We did eat our own cooking and we choked on it."
• Blankfein angrily interrupting Angelides: "Let me ask YOU a question." (he wasn't allowed to finish).
  

I like the guy that tried to blame Wall Street for the demise of all America by luring top talent that could contribute in other areas. Let's face it, if these guys were indeed so smart they wouldn't have had near death experiences. Many would be the smartest guys in the restroom at Yankee Stadium between any given inning, but brilliant people toil in all industries. I would say that those are the kind of questions that have deep implications as there is broad policy afoot to get top college grads to avoid Wall Street, and that's one of the reasons for the myopic focus on banker pay. The moral dilemma for just making money without producing something tangible is thrown at young people all of the time.

I say something tangible is being created, wealth, and when used properly it's one of the greatest tools for humanity. On that note, say a prayer for the folks in Haiti and send help if you can.

The Market

The market is showing some grit here by grinding out gains after yesterday's tough session, led by a rebound in financial stocks.

Wednesday Afternoon Musings
By: Brian Sozzi, Research Analyst

• Don't let the comments from the CEO of BJ's Wholesale (BJ) at yesterday's Cowen conference fool you. While the company's food products, for example, are priced 30% to 40% below that of traditional grocers the same products are priced above competing warehouse chains.
• Culp (CFI) has a small following by the Wall Street analyst community, but the better than expected earnings results after the close yesterday are an important indicator. Demand for the company's upholstery fabrics improved in the quarter, leading to a sales gain that was in excess of three times the consensus estimate. Order for upholstery fabric suggests furniture manufacturers are feeling slightly more confidence in their business trends later this year.
• The sluggish economic recovery is separating the winners from the losers in the home furnishings industry. Bed, Bath & Beyond (BBBY) and Pier One (PIR) are doing well as consumers open up to smaller discretionary purchases. On the other hand, Furniture Brands (FBN) and Ethan Allen (ETH) continue to struggle to get consumers to pony up thousands of dollars on furniture sets.