GKM

How to Spend $700B and Actually Solve the Problem

Isn't it ironic. Enron manipulated mark-to-market to create an overvaluation of its enterprise. Now mark-to-market is the cause of a devaluation of financial institutions. Things could be worse though - there might not be a level 3 categorization.

How to Spend $700B and Actually Solve the Problem

Although your proposal would make sense it would never work. They (Fed and Treasury) aren't join at the hip to any cronies at those other banks you are talking about. Be realistic this is all about patronage so unless you got some sort of a proposal that does that? Oh wait there is one proposed isn't there...

I've seen a number of comments about fascism thrown around lately and I think it worth quoting Benito Mussolini "Fascism should more appropriately be called corporatism because it is the merger of state and corporate power. "

The Harder They Fall - Cramer's Mad Money (9/15/08)

And in an interesting turn of events, Cramer scoffed at those who followed his advice that the bottom "is in". He clarified that when he said "the" bottom he meant "the"re is no bottom and he took credit for being the first call "no bottom".

Take a bow Cramer.

How to Trade This 'Bear' Market - Barron's

So Kass covered in some of his shorts - and left on his shorts for the key institutions that make up America's financing empire. A ringing endorsement for the soundness of the American banking system that is not.

The Real Story on Countrywide, Cont.

They talk about "the smartest guys in the room" but you, Herb, are the smartest guy here without a doubt (of course some offer no challenge).

There is without question some sort of back room deal by BofA with government officials. The only real question is whether BofA was smart enough to foresee that being possible and bought the call option on CFC with the initial deal that they did. Alternatively, they are complete idiots and, as some say, shorting BofA here will be an excellent trade. Does anyone remember Dynegy's failed purchase of of that stink-bomb known as Enron? Look what happened there - so imagine if they'd actually gone through with the purchase! Will BofA regret their craftiness/foolishness...

Let me add another couple points while I'm on the soapbox. It's very interesting to hear more talks about protectionism. The only bailout available (after the Fed has printed all the money that it possibly can) will be sovereign funds. This is America's last and ultimate hope. Keep talking about protectionism and you can be sure that the discount built into the assets, that eventually have to be sold, will be greater than otherwise would have been the case.

It is amazing to me, although not unexpected, that some people just don't get it and probably won't even get it in hindsight. Do people not understand that most people's savings are in their homes? That those homes have lost 20% of their value and will likely lose another 30% over the next couple years (at least in real terms)? On top of that, a large number of baby boomers will be trying to liquidate their homes in the not too distant years to come to finance their retirement. People spend money based on income and perceived wealth. When one drops precipitously, then guess where spending goes. Who have been propping up the economy? The consumer. If no one's consuming, there's less money to go around and hence less income. So income drops. Income drops so spending drops so income drops. This is called the multiplier effect and you can look it up to get a better understanding if necessary. It is a key concept and is just as critical to the continuing credit crunch - which has only just begun. There have only been a couple 'runs' on the bank - so far.

Finally, did anyone pay attention to the crop reports today? Corn - limit up. Wheat - limit up. What exactly are people going to eat that isn't going up in price in a falling income environment (except the carpet in their home)? Does anyone really think that Chindia can be kept from growing and demanding more food and fuel in the years to come? So lower wealth, lower income and rising prices. Where will this leave the level of prosperity of the American people?

Some will undoubtedly say that these comments and of course Herb's musings are out there. Believe what you want - but in a couple years time when those disbelievers are eating crow (literally as well as figuratively) you may look back and recall these prognoses. Remember that the future is never totally obvious to the market - otherwise it would already be discounted in - but the curtain has been pulled back only a little ways so far.

ps. The fiasco with CFC equity and options taking off before the announcement publicly of the BofA deal is another despicable illustration of the decrepitude of the financial markets and needs to be fully prosecuted. Although I'm sure that, at least, will never happen.