LOL --Kudlow Kills Me

He is on CNBC right now saying that we are about to see a new bottom. (Big head shake).

The simple fact is, a bottom will not be reached until investors actually think (believe) that good, safe companies are both good and safe. Until that confidence returns their will be no bottom.

It has nothing to do with the confidence of the president, or the confidence of the fed. Rescuing the right companies is a start. It might help accelerate the stabilizing of those companies; but, until the consumer sees securities of large banks as being as safe as treasuries a bottom is no where in sight.

That is not to say we could not hit a bottom, but anyone who believes they can see a bottom is smoking a prohibited substance.

The Non-SOTU

I was not going to comment on Obama's Tuesday night speech as everything that could be said would be said. That said, "Holy crow can that guy deliver a speech!"

Really, his theatrical ability to fill the roll of the leader is unlike anything I have ever seen (or is it "scene").

In comparison Little Bush looks, well, bush. And, the Republican rebuttal was a joke. If you haven't caught The Daily Show's comparison to Mr. Rogers' Neighborhood, I recommend it.

That's all. I am not going to add to the plethora of dissections that are out there. Yes, he needs a better fact checker, but who cares. What theatre. If you haven't seen it, pop over to Youtube and check it out.

The Market Moves on Small Investor Confidence

I don't know why this well known fact is not discussed more. You will never hear it on Kudlow; you will never read it in the Financial times (though this is a recommended read); and you will never hear it from a politician.

But, the simple fact is: major moves --and by that I mean up or down trends that last years-- by the market are driven by little old ladies in Cadillacs, by portfolios owned by hair dressers, and postal delivery workers.

Institutional investors are there, they have always been there and always will be. That the institutional investor is sitting in cash (the average seems to be about forty per cent) is of little consequence.

The biggest problem is that safe investments are no longer safe. The list is long and you know the names, GM, Citi, AIG, &c.

When holding Citi Stock is unsafe the un-savvy investor flees. And when the small investors flee en masse they take key billions with them. These are the extra billions that puts the market over the top (or under water).

This is the important thing: If the institutional investors were full invested it would make little difference. Sure, the Dow Jones Industrial Average would probably return to 1999 levels; but, without the return of the little old lady from Pasadena that is all that would be accomplished.

Is it "Chicken before the egg?"

Will the, despite Cramer's best efforts, uneducated investor return? That is the big question. In the 1930s that investor never returned. Till the day they died, my grandparents never bought stock --treasuries were all the risk they could stomach-- they were not alone.

I think they will return. But, and this is a big but, they will not return until they are confident that safe companies are, indeed, safe.

When will this be? Nobody knows. Anyone who says they know is either a liar or suffers (if that is the right word) from self dellusion. It could be as little as two or three years (if Obama gets lucky with his programs) or it could be a generation.

It will happen, it will come back. But it might be a good time to get a government job.

I wonder if the post office is hiring.

Late to the Party

A year ago I had never heard of Gillian Welch. I guess I am not alone, but that is a shame, this woman is a great, great singer songwriter check her out at www.gillianwelch.com. You won't be disappointed.

The Poop

The first grandiose statement of my return:

The government doesn't really want the banks to lend all that money.

How can I say this? Well think about it. The first thing that happens during a credit crisis is that people take money out of circulation, they stop spending. In order to float the economy and keep money moving (even accelerating) the mint has to print a dollar for every dollar that is removed from circulation.

This is why printing buckets might not necessarily be inflationary.

Then as people start spending again the mint must print less at the same pace to keep from having a flood of dollars in circulation (definite inflation).

Well, should the banks, tomorrow, start lending the hundreds of billions that they got as part of the TARP funds the fed will immediately lose control, the economy will be flooded with dollars and a loaf of bread will cost $17.50.

What are the banks supposed to do with the funds? Nothing.

That's right, nothing. They are supposed to sit on them. It is capitalization: nothing more, nothing less.

Now the banks don't like sitting on funds, so it was only natural that, under the previous administration, they would dole it out --massive parties, billion dollar bonuses, private jets. (Big head shake) The simple fact is that the banks lent out a multiple of their capitalization that was unsustainable and as they are not able to reduce the loans (how many houses can a bank own?) they have to correct the equation by increasing the other side of the balance sheet --their capitalization.

I think Citi gets this. BoA? I am not so sure.

One thing I can tell you is that they will not be nationalized before healthcare --can you imagine?

I'm Back

Well, it has been almost a year since my last flurry of posts and, once again, I find myself sitting here ready to rant. "Where did I go?" you might ask. Well, despite the Obama's election being terribly exciting and despite the history making nature of it, there were so many voices that I felt I would be doing a disservice by adding mine to the mix. And I was busy with my day job.

Speaking of which, I came across an anonymous blog the other day detailing the mismanagement of a start-up company. I highly recommend it: Never Turn A Short Con Long

I have learned more about economics since I started this 'net-rag and have lots of questions to pose (and a few answers too).

Well, as the song goes, "I'm back in the saddle again..."

Woo hoo.

MSM Mute on Media Manipulation

The pentagon brutally controlled the press for several years; the press knows about it, is complicit, embarrassed and silent. Odd? here

Hours of Fun

Hill just scored a TKO on the big skinny guy.
here

All hail the Uno

Way tooooo cool. And, the designer/builder is 18 years old.
here

D'oh!

Did you know that Perot could have owned Microsoft for about 75 000 shares of GOOG?
here