Banning Gravity?

"The nine most terrifying words in the English language are: I'm the government and I'm here to help"
-Ronald Reagan

Maybe John McCain should have read the Republican history playbook before he jumped right back to where he has been for the last 30 years and removed all doubt that his strengths do not lie on the economic side of the intellectual debate.

Obama knows at least as little as McCain on the most important economic questions of our generation. This isn’t about being political. This is about being right. Who is going to get this right for this country and when? Who has a proactive risk management process, and who does America’s most relevant “Perpetually Preferred” (www.researchedgellc.com, 9/24) investor, the tax payer, trust with his/her money?

These are simple questions that do not have simple answers. Launching what Henry Paulson calls a “Bazooka” of $700B of your hard earned money at t-minus 72 hours alongside a “Fear Mongering” (www.researchedgellc.com, 9/25) threat that the “alternative” of not launching the weapon hurriedly is “financial panic” (George W. Bush, 9/24/08) is both emotionally rash and intellectually absurd.

Plenty of my critics won’t take my word for it – and I don’t expect them to this morning. Maybe they can dial up the 3 Nobel Prize winning economists and the other 166 academic economists who sent a letter to the ranking Republican yesterday, Senator Shelby, stating the same. Maybe they can dial up BB&T Bank’s CEO, John Allison, who’s stock price has not been penetrated by the “evil doer” short sellers, because he proactively managed his $136B bank like a fiduciary of this great country should.

In his memo, Allison hammered home what is such an obvious point: “Treasury is totally dominated by Wall Street investment bankers. They do not have knowledge of the commercial banking industry. Therefore, they cannot be relied on to objectively assess all of the implications of government policy on all financial intermediaries.” Objective fact finding is crucial here John; let me thank you for your better judgment on this matter. Patience pays.

In 2004, there were 5 investment banks that were freed up by the US government (Bush) to lever their brains out: Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns. One, two, three – you don’t have to be a Nobel Laureate in math to count how many of the famed five flamed out. More interestingly, what have we learned lately about the remaining two? Goldman and Morgan Stanley need capital, and their alumni are steering the SEC into scaring the public into a short seller witch hunt. Last night, Paulson’s fellow Goldman alum and hedge fund PM, Ed Lampert, was able to get his stock, Sears Holdings (SHLD), on the no short sale list. Yes, they are a retailer. No that’s not a typo.

While CNBC is myopically drawn to the tree here again this morning, keep the forest in mind. Next week’s macro calendar is critical to respect. Next Tuesday, September 30th, is month and quarter end for the asset management industry. Wednesday, October 1st is day one of what could potentially be the beginning of the largest fund redemption cycle we have ever seen. October 2nd, is the last day that the short sellers are out of the game. And Friday, October 3rd (see my Beware note from 9/19/08) is what it is… it’s a Friday in October… and it’s also the day you’ll see the US unemployment report. Beware.

Self serving politicians and investment bankers cannot stop time or gravity. The Nobel laureates have my back on that too.

Enjoy your weekend – we all need it.
KM



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