Is the cat alive or not?

This isn't some treatise on Schrödinger's cat. Go ahead and look in the box if you must; I'll wait. Satisfied?

No, I refer to the Wall Street expression regarding a surge in stock indices and prices after a prolonged slump. If stocks fall, fall, and fall some more before suddenly reversing direction, there are two ways the trend can go. They can continue to rise, meaning the big sell-off is over, or they can resume their plunge after the short rally. If the latter occurs, it's called a "dead cat bounce," since the market has bounced exactly as many times as a dead cat will bounce if dropped.

The current do-nothing Congress has continued to resist eliminating the insane "mark-to-market" rules for financial institutions, thus causing bank after bank to mark its assets at a perilously low level. Then, the bank must sell assets or issue more stock, in a depressed market, to temporarily stave off regulatory wrath. However, a bank that keeps issuing stock and selling depressed assets sees the value of those assets continue to fall, and so the cycle repeats a few months--or even weeks--later. This short-sighted rule has turned paper losses into actual losses counted in the billions of dollars. End mark-to-market now, Congress. We can wait until next year to rip up Sarbanes-Oxley, called by some wags the "London Stock Exchange Stimulus Package," since many corporations have decided to skip New York and incorporate in London, where the atmosphere is more civil.

Anyway, the fire-sales coming from financial institutions and hedge funds have worked to seriously depress equity prices and, due to looming financial losses, bond prices as well. Is it nearly over? Well, yes and no. The rapid forced sales of equities may be nearing an end, but what about the fundamentals of the companies represented by those equities? Many forecasters expect 2009 to be a lean year indeed for corporate earnings, so while the prices of stocks have fallen, their P/E ratios--looking forward to next year's earnings--haven't improved all that much. Stocks may be cheap now, but they can get cheaper, and spend quite some time in this wilderness before they approach 2007's lofty levels.

Add to this the federal government's continuing drive to increase the deficit over the next 24 months by well over a trillion dollars beyond previous forecasts, and we don't see any realistic hope of tax cuts from the next Congress. Too, the massive cash infusion will continue to cheapen the Dollar--gold at its current eight hundred and something dollar price may look cheap by 2010, and if we're still enjoying sub-$100 oil it will be mainly due to a global economic slowdown.

Disappointing earnings, a shrinking Dollar caused by increasing inflation, and always the wrong answers from Congress--look for calls for still more onerous regulations on the American businesses that did nothing wrong here--point to a period of stagnant stock market prices. It may indeed be a good time to buy, now and over the next year or two, but don't expect big returns before 2011 or later. That said, waiting for a definite bottom to buy may result in missing the large, steep upsurge in stock prices that will eventually occur. So I'll buy shares of strong, profitable companies whose stock is depressed beyond reason, but keep plenty of cash free, since I can't count on selling those shares for a significant profit for a while. Think it over.

One Lie He Didn't Tell

On the wire services today, we read that the Obama team has selected "Chicago businesswoman" Penny Pritzker to head his Commerce Department. Oh, she's a businesswoman? What business would that be?

Could this be the Penny Pritzker who sat on the board of Superior Bank, the same Superior Bank that collapsed and sucked down about $800 million taxpayer dollars? What happened there is instructive, but not surprising. In a 2002 report FDIC Inspector General Gaston Gianni Jr. wrote, “the failure of Superior Bank was directly attributable to the Bank’s Board of Directors and executives ignoring sound risk management principles.” Sounds serious, all right. What was the end-game?

The Pritzker family paid the FDIC $460 million to end the investigation and sidestep a possible crminal investigation. This was a bit more than half what the Superior Bank fiasco cost the FDIC and, by extension, you and I. Naturally, Penny and the rest of her family lived out their remaining years in seclusion and shame.

Just kidding! They have no shame! Penny has worked as National Finance Chair of Barack Obama's presidential campaign for more than a year. Good choice; if anyone knows how to squeeze money out of the taxpayers and walk away without conscience, it would be Penny.

Getting back to the lie that Obama didn't tell: At least he didn't claim his adminsitration would be "the most ethical in American history."

Update: Over the weekend came news that Pritzker was just a trial balloon, testing the waters, feeling out the zeitgeist, and wondering just what they could get away with putting over on us. New Mexico governor Bill Richardson is the actual choice for Commerce, it seems. Perhaps the Obama administration will hire two press secretaries, so they can pronounce competing visions on each issue. Dee Dee Myers and George Stephanopoulos may be busy, but I'm sure someone else will step forward.

Whatever It Takes

The president-elect has pledged to "do whatever it takes" to "revive the economy." That's what I was afraid of, actually.

His minions did whatever it took to get him through the primaries.
Rezko and his wife did whatever it took to get Obama into that big Chicago house.
Lawyers did whatever it took to get his opponents thrown off the ballot in his first state Senate race.
Handlers did whatever it took to find only compliant interviewers for him (On second thought, that one was a gimme).
Supporters did whatever it took to ensure his writings-and thesis works--at Columbia remained concealed.

With markets down over 10% in less than a week, apparently investors already expected more "whatever it takes" to head their way. Fasten seat belts, people.

Do-Overs

Apparently they're going to be big in the near future.

Treasury Secretary Hank "Henry" Paulson ($, DC) has decided that the 700,000,000,000 taxpayer dollars provided to buy "troubled" assets will not actually be used for this purpose. He's casting about for other ways to inject liquidity into capital markets. Well, hey, enjoy the blank check, Hank, and let us know how you've decided to deploy our money. When you get the chance.

Could this cause it to dawn on people that nobody involved in the bailout has any firm plans, except to grasp as much money and power over our economy as possible? I can hardly wait to hear of the Glorious Five Year Plan For Prosperity, Low Inflation, And Higher Crop Yields. Meanwhile, Nancy Pelosi continues to see taxpayers as one big piggy bank, and wants to give the big 3 automatkers 25,000,000,000 dollars. This would allow the auto makers to continue to pay thousands of people to not work (Job bank), and pay pension and medical bills for people who will retire in their fifties. The unions came through for the Democrats, so the Democrats intend to come through for the unions.

In another do-over, Weather Underground terrorist Bill Ayers has finally surfaced, after an exhaustive search that ended when ABC News called him on the phone. Bill "Boom-Boom" Ayers was described in the interview as an "activist." Suicide bombers in Hamasistan have been described that way, too. As one wag put it, you wouldn't want to be next to one of those "activists" when he activates.

I'm looking forward to the opportunity to change my past, as well. Buying GE at $32, certain college grades, ill-chosen words at parties; It will be great to erase these and more, in the coming New Era!

Bitterfest

Jay Nordlinger offers some sobering thoughts, wrapped up in twenty neat bullet points.

Give it a read.

The Resistance Begins!

Sure, it will be a bumpy four (or fewer) years. But let's keep it in perspective--we survived Jimmy Carter. If the man who beat off an attack rabbit with an oar and produced an energy policy that can be summarized "put on a sweater" didn't finish us off, we must be pretty resilient. I'll do what I can to reinforce that resilience. Here's what I intend to provide:

• Political commentary. You probably knew that was coming, so I'll let it speak for itself.


• Links. Interesting, insightful, amusing, or just weird. They may change from time to time, as a site falls out of favor and another catches my eye.


• News updates. If I uncover something interesting that's not making headlines in the obvious places, I'll mention it.


• Financial commentary. I'm not an investment advisor and, even if I were, you'd be crazy to buy, sell, or hold based on one Internet commentator's input. So keep your wits about you, and consider yourself disclaimer-fied.

Please note that this blog will not be entirely--or at times mostly--political. That may or may not be a plus for you. I feel that, while the political hurricane which has breached the levies of responsibility and overwhelmed the drainage canals of rationality is a major event, it's not the only event of note these days. Too, we could all use a break now and then.

So let's enjoy our coming time together, and laugh heartily at the follies we face. We may not always agree, but I figure that this blog will be priority number 7,000,000 on Chuck Schumer's to-do list for the Fairness Doctrine, so you're just going to have to roll with it.

Election Reflection

If the stakes weren't so high, I could have been mightily amused by this year's election run-up. Sometimes it seemed like an extended Saturday Night Live skit. I mean, from back in the days when SNL was funny. Consider:

• When will Keith Olbermann's handlers get him that badly-needed distemper shot?


• Was Chris Matthews certain his leg was tingling for Obama, or was it time to shop for Depends?


• Where was John Edwards? Couldn't he tear himself away from the baby-supplies catalogs long enough to provide welcome comic relief?


• Fascinating as Sarah Palin's campaign wardrobe allowance was, I couldn't help wondering about other moneys, like $700,000,000 in donations from the likes of Mickey Mouse, Donald Duck, and anonymous Middle Eastern sources.


• Apparently the old "This Is Your Life" television show is being revived. In its new incarnation, the contestant asks a policy question of a political candidate, then has his personal life examined and publicized for national consumption. In the bonus rounds, government workers illegally access records to sift for embarrassing information on the contestant.

In local news, no surprises, except for the passage of Proposition 8. Apparently it's possible to overreach, even in California. Naturally, we've only endured Round One of that circus, as the Governator has suggested the state Supreme Court will invalidate the action. That's an interesting legal theory: Declaring a Constitutional amendment un-constitutional. Perhaps the squat, broad Austrian needs to brush up on the concept of the Constitutional amendment process. On the plus side, I haven't heard much talk lately of amending the U.S. Constitution to allow someone not born here to serve as president. So, thanks for that, Arnold.

At any rate, I can hardly wait to take advantage of this newfound love and respect the world will show the U.S. Lower tariffs, respect for national borders, real assistance combating terrorism and rogue regimes, an end to the proliferation of dual-use technology to execrable tyrants in North Korea, Iran, Syria, and Venezuela, and the introduction of sanity and accountability to a United Nations sorely lacking both. And that's just what I expect to see by the end of January! Yes, according to ABC/CBS/NBC/MSNBC (Not technically one network) a new era has dawned.