But it may be the end of capitalism as we have known it. 

Lets face it, without herculean and unprecedented concerted global governmental intervention in the financial markets around the world, to the tune of almost $2 trillion since last summer, there would be rioting in the streets of nearly every major city in every developed country in the world. I mean full scale social unrest not just by young hoodlums, but by seniors who used to have pensions.

Now what do we have? What do we call the current financial environmental conditions after such massive efforts? Who’s in charge of figuring out the real problems and then powerful enough to lead - force the world to drink the very bad tasting medicine of doing more with a lot less?

First of all lets not forgot one thing. The same people who said let ‘Lehman Brothers fail’, (the dumbest decision especially in light of the saving of Bear Stearns (a much smalled investment bank). This was the first big explosion and tipping point giving rise to the current global mess. The same guys who made that decision are still in charge. Let’s hear a hip hip hooray for the Bernake / Paulson team….mosgt arguably the best and brightest minds we have at the financial tiller. I don’t know about you, but the little confidence I had before the Lehman failure, is totally non existent today.

Q. So what IS the real problem?

A. LACK OF CONFIDENCE

Its not just a lack of confidence that banks are suffering from that is keeping them from lending, its the total lack of confidence across the board from Main Street, to the factory floor, to the farmers tractor, to the airlines pilots…and you guessed it - the automobile industry. Everyone, not just the banks are frozen solid in fear. And I don’t care what that Goldman Guy - Mr. karmanzan or Mr. Krackhead says. Very little real progress is being made, and the problems are certainly much larger than we are being let to believe. 

One must understand one central tenet about markets; they are driven by human emotion. The avoidance of pain - fear, or the attainment of pleasure - greed.  And without repeating myself, the world is in a vice grip of fear. President “W” or president “stupid” as I like to call him, is about as inspirational as a someone who’s brain dead. Bernake has some brain waves, and motor skills, but not much more. and Hanky Panky Paulson would be inspirational at a bank robbers convention, but not at many other locals.

Enter ….maybe just at the right time, Mr. “Yes We Can”. I don’t know how you voted, but if you voted for Barak Obama simply because he CAN speak inspiration-ally, and compellingly, and he is a guy with a full tool box when it comes to brains, composure, and ideas, then you did a good job, You voted for the right man.Given that the Dow Jones Industrial Average traded below 8000 today, the 44th president can’t be sworn into office soon enough.

Yes he’s a Democrat, and Republicans fear that there will be too much government meddling in our lives, thus snuffing out the free market - no regulation “Capitalist” environment. Ben Bernake, and Hank Paulson have already started us down a path of American style socialism. The question that I have is; what will the final mixture of capitalistic free market activity we’re  left with after the government owns the auto and banking industry look like?

Personally, I think the airlines are next. Of course, we know that private healthcare  is simply looking for a plot to put its coffin.Thus this articles title….it’s not the end of the western world….but it is the end of the western world as we have known it. And the lightly regulated free market capitalism culture of the past has a lot of explaining to do!

Walter Schuber

 

Like the majority of the voting electorate who delivered America from the grips of eight years of divisive, narrow minded and misguided policies bred by the lack of real courageous leadership, (I’m being polite), I was stunned to learn that 70 percent of the African American population in California voted yes on Proposition 8, banning same sex marriages in California. Then of course there was Florida, and Arizona where the same outcome prevailed on similar ballot initiatives. The icing on the cake – actually dagger to my heart - may have been the banning of adoptions by gay couples in Arkansas. ‘No child should be raised by a freak of nature’ said one toothless backwater swamp thing�.

Watching as many of us ‘freaks of nature’ did – (that’s hard working tax paying second class citizens who happen to be gay),  Barrack Obama’s victory speech on Tuesday,  all of our hearts lept upon hearing him use the word ‘gay’ (“Wâ€� hasn’t used that word once during the entire time he was president – no kidding!). God I thought, how wonderful to hear the future leader of the free world use that word. I gushed when he spoke so passionately of the rock of his family and love of his life – “Micheleâ€�. But my heart sank when I thought about all those LGBT Americans who have the same kind of passion and life’s deep loving commitment experience that comes with a grounding presence in their lives too, but can not get married.

Now, in my earnest humble and most respectful opinion, I beg President Elect Obama to walk the walk of a true champion of equality for all Americans.

As a member of the United Church of Christ – a protestant denomination which will marry gay couples – the only Christian church which will, can President Obama get with the Equality program? I say ‘yes he can’.

Its was an historic day for all African Americans to have elected an African American president….but despite his statements that he does not believe in same sex marriage, I ask  can he see the misguided way of his thinking on this issue. To this I say ‘yes he can’.

I implore him and the Democratic Party to whom the LGBT community has been so fiercely loyal for so many years, to now seize this unique opportunity to truly level the social playing field in this great country. I believe they can and they must.

Can President Obama guide the African American and Hispanic faith based communities into an understanding that we are all children of God and equally deserving of his love? I believe he can…I say ‘yes he can’.

Is President Obama willing to spend some of this landslide political capital on abolishing “Don’t ask Don’t Tell? I believe he can. Will President Obama and the Democratic Party with clear majorities in both houses bring and pass legislation granting all LGBT American’s the right to marry their own love of their lives? I believe they can.

To all of the above, the tears in my eyes say “Yes he can…yes he can…yes he can�, but something in my heart tells me that the mountain he seeks to lead the American people to climb over the next several years is not this small foot hill.

That’s what it really is you know. It’s just a foot hill. Just ask the people of Massachusetts who said “yes we can� and did. Just ask any 15 year old high school student who bravely comes out to their parents and classmates. They believed they could live as an equal member of society in every respect. Just ask the legacy of Dr. Martin Luther King – and his wife Coretta Scott King - They did.

Yes President Obama, you can too. Yes you can! It’s a foothill we as Americans who are gay are willing to lead you and the Democratic congress to climb this hill ….and NOW is the time. Love is a small word, and so is this hill.

Yes we can.

Treasury Secretary. I also said that we should re-enact a form of Glass Steagall (July 7th “Bring Back Glass Steagall�). What can I say…no one listens!

And what I consider the worst part of this whole mess is that Lehman Brothers did not have to go Bankrupt. Indeed, were I prone to conspiracy theories, I would say that Hank Paulson – who owns 10’s of millions of dollars of Goldman Sacks stock, should NEVER have had one word to say about what to do about the fate of Lehman Brothers. Did he recuse himself from discussions on Lehman Brothers? NO. Did he stand to gain personally – either positively or negatively – re the decision that the FED and Treasury would make about Lehman – YOU BET! Did he recuse himself from any of the meetings where this was being discussed? NO WAY.

Does it hurt Hank’s portfolio and huge holdings in Goldman Sacks that one of Goldman’s largest competitors has been effectively knocked out of the game? NOT ONE BIT!

Best of all, the proposal that Doug Fuld, the CEO of Lehman Brothers put forth to the FED and Treasury the weekend before they went under, was that they be allowed to become a “Bank Holding Company� which would have made it easier for the company to borrow. The FED said no – which all but guaranteed their demise. And guess what….within 5 days, Goldman Sacks, Morgan Stanley were permitted to become Bank Holding Companies.

Honestly, while I am not a conspiracy theorist, it makes me wonder. Now we have a 35 year old wet behind the ears guy named Neel Kashkari who is responsible for determining how the $700 billion is parceled out to financial institutions. (He’s a Goldman Sachs guy). The head of the U.S. Treasury Hank Paulson is a former head of Goldman Sachs. I could go on, but I would run out of paper showing the trail of ex Goldman Employees who are in positions of serious power in our financial system. Can anyone see the obvious problem with Neel lending money to a Goldman Sachs client? Da! I can.

Ladies and Gentlemen, if I could see the problems early last summer, why didn’t the FED and Treasury? BTW, all it would have taken to avert the huge crisis that we are now facing would have been simple letters of guarantees or letters of Credit from the FED and the Treasury guaranteeing the loans banks make between one another. That should have been the first move, and I will bet you dollars to Yen, that’s all it would have taken to have averted this crisis.

Was this crisis allowed to happen to the ultimate gain of a market participant?

You tell me?

It’s a good thing John “Hellcat and Save the Day� McCain came to Washington last week to assist President Dumb Dumb in pulling the Republican Party together for arguably the most important piece of legislation to be voted on in a decade. (War votes aside). As the House was voting CNN was switching between the House floor and the NYSE trading floor as the market tanked 500+ points. Then CNN switched to McCain on the campaign trail in Ohio with “Soccer Mom & Viscious Moose Mangler� Palin jazzing up the crowd leading into a crescendo “Heeeeere’s Johnny� reminiscent of the Johnny Carson show.

Johnny like Beehive Palin (That beehive hairdo has to go), beat his chest and worked himself into a lather about how he swooped into Washington for the rescue while Obama stayed on the Campaign trail. Looking at the vote and defeat of the bailout package, Johnny would have been better off hiding inside of the Sara’s beehive.

We all knew how incapable Washington and our elected officials could be in the face of extreme challenges, but their failure to understand, and act responsibly by voting Yes on today’s package is really astounding….I mean all time stupid.

As the pros on the trading floor of the NYSE watch the market get clobbered for the umpteenth time in the last month, now the markets in Europe are all down over 4% today. Next it will be Asia…then when the dust settles; the little that’s left of the American financial system will for sure no longer be the envy of the world. We will be lucky if we rank in the top 3 countries after the vote today.

So to celebrate today’s vote, take one of your prized possessions to a pawn shop and get what you can for it, because for sure the banks don’t have a nickel to give you. Even if they did, they wouldn’t…and that there folks IS the problem. While the Banks may have had some money after a yes vote, there were no guarantees they would have started lending money.

Keep your helmets on; those aren’t raindrops falling from the 34^th floor. That’s Mr. Osborne and his safe.

That’s right, I said it. It doesn’t matter how much money Mr. Paulson, Mr. Bernake, President Stupid or every member of Congress approves to fill the greed bucket of Wall Street.

There is a crisis for sure, and no amount of money will remedy this… it is a crisis of in confidence.

How does one restore confidence you ask? By making tough choices, and then following through with them. What are the tough choices that need to be made right now? Here are a few suggestions:

1)      The Proposed RTC’esq structure which would oversee the purchase of all the bad assets be allowed to be traded as a publically traded government insured entity. That would allow the American public an opportunity to [purchase “bad assets� on the cheap like the private equity funds that will when this entity finally takes shape.

2)      Cut government spending now! Put a hiring freeze on all government jobs and then cut the expenses of every government department by 10% immediately.

3)      Offer early retirement packages to any government employee who has 20 years service.

4)      No more deficit spending in future budgets. Its pay as you go.

5)      Give the president the line item veto

6)      No more “extras� / “riders� salted pork attached to any pieces of legislation.

7)      Term limits for all members of Congress – 3 terms for Congressmen, 2 terms for Senators

These are just a few ideas for starters…..I can come up with more.

And you’re not going to like what I have to say next. This current crisis is probably worse than the crash of 1929. Why? Because there are no true leaders / visionaries with the skills and courage to lead the world out of this mess. I’m voting for Barack Obama, but I don’t think - as much as I like him as a person-, he has the overall juice that it will take to lessen the impact that is yet to come from this catastrophe.

Get your helmets on folks … this is no practice drill!

At last our elected officials have realized that putting separate band-aides on separate bullet wounds …one at a time, could not stop the bleeding. Now that there is discussion of a RTC - Resolution Trust Corporation’esq a government owned company that would buy the assets that banks and brokers don’t want, there is hope. BTW… for all you folks - ordinary taxpayers who think your getting screwed, you won’t. Those assets that the government buys will be sold later on to private equity players for a handsome profit, which comes back to the tax payer in the form of lowering the debt., This RTC Corp could likely be funded by hundreds of millions of dollars - i mean a huge sum of money. 

 But this Blog isn’t really about what the government is now going to do after major firms like Merrill Lynch merged with Bank of America, Bear Stearns was rescued by JPM. No this blog is about how Lehman Brothers - one of the best firms on Wall Street had the ultimate ‘bear raid’ put upon them in the form of several creditors pulling their lines of credit forcing the company into bankruptcy. And then…the Government says…sorry - we can’t help YOU.

 Now only a week later they are about to help Morgan Stanley, and AIG. What gives? Does someone inside the beltway dislike Lehman Brothers?

 To me what happened to Lehman Brothers stinks!

Crazy, Dumb, or  Smart Like a Fox?

One has to wonder what Lehman Brothers is telling the Korean Development Bank as it has all but decided to purchase a 25% stake for $6 billion. That would put the valuation of Lehman Brothers at $24 Billion….WHEN ITS ONLY TRADING AT A VALUATION OF $11 BILLION. (I wasn’t very good at math, but this looks to me as if Lehman is smart like a fox, the Koreans dumber than dumb )

Personally, I think this means that Lehman is near the end of cleaning up its balance sheet and will emerge - should the deal go through, in a much stronger position. It might even signal that the worst is nearly behind them re the subprime mess. This is the kind of Kool aide that the shareholders and management of other existing financial institutions will have to drink before they really truly and believably clean up their balance sheets.

Friends ask, (they think I’m crazy period), does this mean that it’s OK to buy Lehman ($15ish), or hold out until the rest of the gang (other banks) get their act together? [Well first of all as a disclaimer – I don’t own any Lehman Shares].- and 2nd of all, I think the entire sector will remain under pressure for at least 2 quarters.

Things will start to look up when Banks think its safe to lend again, and that won’t happen until spring of next year. And finally…and this is personal …I’ve owned Lehman in the past and was never kissed, and only teased. Not a pleasant experience if you really really like the company.

Well, I’ve learned my lesson; not until I’m no longer teased with a vision of the promised land (profits), will I even entertain owning this company. As they say …fool me once, not my fault. Fool me twice, now that’s my fault. What does that make me? Craxy, Dumb, or Smart?

Wishing everyone a great trading day

“But Sweetheart….It was A Good Buy�Famous last words of a husband who purchased – actually fell in love with and got married to – any one of the more troubled financial stocks these days. He wasn’t listening to the good angel on his right shoulder saying in a high pitched tinker bell squeak of a voice…. “Oh no Mr. Bill, that’s not a good buy….that’s a good BYE…as in good bye house, good bye retirement, good bye sweetheart and good bye the next ten years vacations.�But no…Mr. Bill did what every unseasoned and even seasoned (believe it or not) investor has done at least once in their investing lives, and that’s ‘double down’ or average down when the price of that “must have stock� goes below where one originally purchased it. On Wall Street…you know what they say about averaging down? They say it’s like kicking S**t out of bed. A very nasty sloppy experience – never clean, never pretty. It just makes ones portfolio stink.

Anyway…the point is, that when that miserable stock doesn’t perform the way you’d have expected them to under the circumstances, you sell them – fast.

This is very very important - Learn how to take a loss. My rule of thumb is if any position I hold is down more than 8%, I’m out - and I never look back! It’s done, it’s over, on to the next trade cause I don’t need the pain, anguish, or time thinking about carrying a bad and mostly disappointing position.

In closing…Listen to Tinker Bell, that inner voice that speaks to you when you are making important decisions. I’ve found over the years, that that little humming bird is right many more times than it is wrong. On the trading floor we called it our ‘gut instinct’. Learn to trust it.

Think of it this way….every time you sell a stock and take a loss, try to remember what Humphrey Bogart in Casablanca didn’t say in his closing line… “This looks like the end of a beautiful friendship.�

It’s so easy, maybe even too easy to point the finger of blame for today’s financial crisis at former Federal Reserve Chairman, Alan Greenspan.

 

There, I said it! And coming to the defense of Alan Greenspan on Wall Street these days might even brand me a fiscal heretic. On the “Street�, where I’ve had the comically questionable fortune to know many would-be economic aficionados with cloudy green eye shades, just the mere mention of Greenspan sends people into imitations of Linda Blair’s head spin in the Exorcist. But pea soup and doll swirls aside; In my humble opinion, Chairman Greenspan is not the demon responsible for the current financial systemic malaise. But, before I reveal the devil himself to you my avid reader, let me offer a little defense for Dr. Greenback.

 

In today’s Wall Street Journal there’s an article by David Wessel which notes that as early as 2002, according to minutes from Fed meetings, Chairman Greenspan was quoted as saying, “It’s hard to escape the conclusion that at some point our extraordinary housing boom….cannot continue indefinitely into the future.� So this tells me that Chairman Greenspan was not asleep at the switch, but cognizant of the potential dangers and inevitable decline. The article goes on the note that Greenspan believed that if there was a decline, it would not pose a significant threat too the entire financial system. This was not an irrationally exuberant or wishful thought at the time. No one would have believed at the time that the housing market would experience a severe and precipitous decline.

 

So Alan Greenspan’s position both privately and publicly was that if there was going to be a decline, it would not be severe. Thus all of you with pointing fingers and loaded guns aimed at Alan Greenspan, who want to fault Chairman Greenspan for leaving the punch bowl out at the party for too long, please settle down. Get a hold of yourself and put that six shooter back in the holster. Chairman Greenspan was, as Thomas Friedman would say, dealing with an entirely new paradigm called a global economy, and can not be singularly blamed for today’s financial catastrophe.

 

Ok…now to the real demon behind today’s systemic problem and fiscal crisis.

 

Simply put, (yes simply put as from a 30,000 foot view), it is and has been the worldwide perception that Fannie Mae and Freddie Mac - the holders of over $5 trillion of real estate debt, are government insured entities backed by the full faith and credit of the U.S. taxpayer (notice I did not say government). This was the perception… meaning that even though it wasn’t the reality, investors world wide always believed  (or better yet, ‘wanted to believe’) that should there be a housing market collapse – because these entities were ‘government sponsored,” the government would simply change the word sponsored to insured. Heck…its just a little 7 letter word right?

 

So the U.S. bankers, who believed, and the foreign bankers who believed, and the U.S. investment banks like Bear Stearns who believed, ….BELIEVED in something they knew was not true at the time. But guess what? Today with Congressional authorization, Treasury Sectary Paulson has the authority to lend to Fannie Mae and Freddie Mack whatever it takes to keep them from going belly up. Ahhhh – perception becomes reality. Like my Wall Street mentor always said; “in sex, drugs and rock and roll, perception is always more fun than reality!”

 

So the devil is alive and well, and the flames of future failure on a scale even larger than what we have already seen remains a very real possibility. One has to wonder if we’ll ever learn the lesson from the Japanese real estate bust, and the debilitating period of deflation, the embers of which are still glowing in that economy. One has got to wonder how long the Chinese, Japanese and the British will be willing to support the irresponsible policies of the U.S. government – Republican and Democrat alike.  

No Confidence is worse than false confidence, and the obnoxious and arrogant hubris that is spewed by economic idiots like the current President of the United States – George W. Bush has become nauseating. Lets be crystal clear (as Richard Nixon would say), the record budget deficits, caused by ill advised tax cuts, an ill planed and ill conceived and an illegal war – (yes,,, we were most certainly lied to about the reasons for going to war – and how the man has not been impeached is beyond me – good going Nancy Pelosi!), are the tangible reasons for a weak dollar. I say tangible, because we can easily point to these things as catalysts for a shrinking greenback. But what is not pointed to directly, is that the real reason is the total lack of confidence that the world has in this administration. Let me repeat the old maxim for the value of the realms coin.

The value of the realms coin is determined solely based upon the confidence placed in the ruling administration in power at the time. A weak administration = a weak dollar.

Let me also be clear that Ben Bernanke has done a mediocre job at best running the Federal Reserve Bank. His terms is up in 2010, and were I president I would not re-appoint him to this post. He was far far too late to surmise the extent of the problem of the Sub Prime debt problem – this when his president of the NY Fed was warning last winter – no begging for attention to this problem that would bring down the system. Bernanke paid not heed at all.

Finally…and this really galls the hell out of me. Please, ok please let’s not fall one more time for this baloney that the recent decline in the price of oil isn’t somehow tied to swaying the American Electorate toward McCain (pro oil) and away from Obama (anti oil). It most certainly is. One can simply go back in time and look at the trading patterns of oil over the last several elections and note how the price is jacked up in the in the beginning of the summer and then by August comes crashing down – thus removed as a campaign issue for the anti oil candidate. We’re I an advisor to Sen. Obama, I might point this out and as there are many smarter people than me out there in academia on his campaign, they can work up the tables to show this pattern.

So, if I’m sounding a little jaundiced today, it’s because I’m just a little fed up with the crap that we keep being fed and expected to swallow.

What is true and what I can believe ….

1)      You don’t fight a war and lower taxes

2)      You don’t treat a crisis as if it was an ordinary event

3)      You don’t look at patterns and say there’s not a pattern

4)       Don’t look at George W. Bush and say he’s done a good job

The worst president in the history of the United States by a margin so wide, that you could float the QE II through Erie Canal. = George W. Bush! He should be impeached, and he and Dick Cheney should be tried for War Crimes.