The Market Ticker

I'm sure you heard many, and will hear many more.

Let me point out a few facts:

1. The stock market typically turns around about six months before the economy does.  If you believe we are at or near a bottom, you must believe the economy will turn around no later than May or June of next year.  Carefully think that one though, ok?
2. Bottoms are not made off "V"s.  Historically, it simply doesn't work that way.  Go back and look at 2000-03.  There were three separate tests, the first of which failed, and the entire process took nearly a year.  Many people bought the first recovery and got it in both eye sockets when that rally failed, only to watch the spike just barely go lower and reverse - they not only bought the top on the rebound but then sold the bottom!  Yikes!
3. The 13/34 EMA (or 20/50SMA) on a weekly basis is widening.  It is, in fact, at the widest it has been during this bear market.  Let's talk about the possibility this bear is ending when the 13 EMA (or 20SMA) is pointing upward or at least has flattened, ok?  These signals are not perfect but they do work.
4. If you are still in the market long, you're gambling no matter what you do.  I have gotten a lot of emails asking me "what do I do now?" from people with portfolios that are still invested.  Never mind that I'm not a registered investment professional and thus can't (and won't) give specific advice, the fact remains that you sat through a nearly 50% decline and now on a 10% bounce you want to know what's next.  There is no correct answer at this juncture.  The right time to exit long was (at the latest) at the end of December of 2007.  Any choice you make is a pure gamble on an outcome that neither I or anyone else can predict.
5. The 2000-03 bear market was accompanied by a business recession brought about by the popping of the Internet bubble.  At no time did consumer spending go in the tank during that recession; it never posted a decline!  This time we're just starting to see real consumer spending declines, and this is a consumer-led recession - the ugly sort that happened back in the 1970s and early 1980s.
6. The market lost nearly half its value in the 2000-03 recession without any consumer spending declines.  The move from 1995-2000 was a credit-bubble led move.  So was this one, but this one nailed both consumers and businesses.  If we remove that excess credit and leverage this suggests we could retrace all the way to 450 on the SPX!
7. On a technical basis this is a clear 8-year separated double-top.  Basic chart analysis suggests that when such a pattern is confirmed, as this one has been, you are likely to lose the entire move to the first top.  That also targets 450 on the SPX.
8. The 2000-03 decline required two full years to reach close to the bottom.  It also "counts" on a monthly chart as five waves of decline, in accordance with Elliott Wave Theory.  This decline only counts as three waves thus far on a monthly chart, suggesting that not only may (III) down not be complete, but even if it is, you still have (IV) and (V) to come!  This also strongly suggests that 760ish, the 00-03 bear market bottom, will not hold.  In addition this "bear market" is less than a year old at this point, having initiated in November or December of last year, and thus is less than halfway over on a historical time perspective compared to 2000-03.  If you look at consumer-recession associated Bear Markets of the past (think 1970s) you will find that those are far more vicious than the 00-03 Bear, and the losses heavier.  Thus, expecting the 00-03 experience to be the "end point" is, in my opinion, hopelessly naive.

In short there is absolutely nothing in the past history of the market to support a "bottom" call here.  Remember that CNBC's mouth-breathers along with virtually every commentator called a bottom in March and then again in July.  How has that worked out?

Is it possible we have bottomed here?  Sure.  Anything is possible.  I could win the lotto this coming weekend, if I buy a ticket.

But hope is not an investment strategy and there is a difference between trading a bear market rally (and, if we have in fact finished (III) down, we're due for one that might last a couple of months) and investing for the long term.

If this bear is not over, then the 13/34 EMA and 20/50 SMA (on a weekly chart) will not cross back over.  If you are a conservative investor you should have gone to cash in December of 2007 at the latest. 

If you did not and are now paying attention to the bottom callers you are engaged in "investment by prayer", which is a horrible strategy and has been the ruin of many people in the market.

If you did go to cash back in 2007 based on a long-term timing signal and are now engaged in going back into the market "long", one has to ask - why would you be doing that when those same long-term timing signals are in fact still diverging - that is, showing deteriorating rather than improving conditions?

Finally, analyze your investment thesis based on what you think the economy is going to do.  If you can come up with a cogent belief that the economy - the consumer portion of the economy - will in fact turn around by June of 2009, then you have an argument for trying to scale into investment positions for the long haul at this time.

Personally, I don't see it. 

Yesterday's rally was an abberation that was kicked off by massive intervention in the Yen, whether the Bank of Japan admits it or not.  That chart action was not natural and did not occur on its own.

Neither was the action in VW and the DAX.  People ought to go to prison for that stunt.  Of course they won't because "it made prices go up", but in my opinion what happened with Porsche and VW, along with the various banks involved, is nothing short of a criminal conspiracy and everyone involved in that should be getting a 20 year date with Bubba.  The DAX is heavily-correlated with our markets (always has been - look at some charts) and when it closed out with all those hedgies facing an angry margin clerk they came over here and bought paper like nobody's business.  I was listening to the pit audio feed today and magically there were large paper buyers who suddenly showed up shortly after Europe closed.  Once the daily range was broken that was all it took as there were a lot of people caught offsides who were forced to cover and whammo - up goes the stock market like a rocket ship.

Coincidence?  I think not.

Sustainable?  A sign of a bottom? 

Like hell - panic'd short-covering isn't a sign of anything except panic, and bull markets are marked by the absence of panic - they're euphoric events if anything - the opposite of panic.

Further, there is a cogent argument that a good part of this move was driven by technical rebalancing of so-called "balanced funds"; the moves in both bonds and stocks in the last month has required a quarterly rebalancing that would force buying of stocks and selling of bonds in fairly significant amounts due to the violence of the move.  I suspect these funds were trying to scale these moves, but when that violent spike began yesterday this materially added to the panic factor, as the managers suddenly saw the potential for +2000 on the DOW over a couple of days - and their horizon, at this point, expires Friday. That will stand your hair up when you need to move several billion dollars and the last thing you want to do is buy the top on the last day!

If you bought this rally in a mutual fund or otherwise I predict you're going to be crying in your beer within days to weeks.  The FOMC rate decision is today and then we have GDP on Thursday, with the latter virtually guaranteed to suck.  Either or both of those could easily erase those gains as fast as they went on, with interest, and if that happens you will hear lots of wailing and gnashing of teeth.  I remind you that on the 13th of October a similar spike higher occurred and the ensuing couple of weeks were not good for your account balance if you bought that rally, never mind that it appeared in the morning that we were going to get the mother and father of all follow-throughs.

I see the following on the horizon for the consumer portion of the economy and the stock market:

1. Obama is virtually certain to be President of the United States.  He will raise taxes and spend until the bond market forces him to stop through radically higher interest rates and/or a grossly devalued currency.  Either of these events will further damage your standard of living and credit availability.  Even if by some miracle McCain was to win, he would be little better in this regard with a majority Democrat Congress both in the House and Senate, which is assured.  Either way business and personal economic conditions will deteriorate further for a significant period of time.
2. The credit excesses have not been wrung out of the system.  They have instead been intentionally and, in my opinion, criminally hidden. Neither political party has done a damn thing about the real problems, instead choosing to shift them onto the public's balance sheet.  As noted this will eventually lead to a bond-market revolt or a radical currency devaluation.  We have as a nation made critical errors in handling this crisis going back to the summer of 2007 and we must pay for those sins before the economy will turn around.
3. For a good example of what happens when you hide the truth instead of forcing it into the open see Japan's Nikkei Index.  It was almost 40,000 in 1990.  Nearly 20 years later, it has never been materially over 20,000 again, and now is under 10,000.  This is a direct consequence of Japan's government choosing to hide the speculative excesses of Japan's credit and real estate bubbles of the 1980s when they burst in 1990, rather than forcing them into the open and dealing with them.  Despite 20 years of trying, Japan has been unable to create material amounts of inflation, being stuck in a deflationary to flat monetary environment for nearly twenty years.  We are headed for - at best - this scenario if we do not change our political and monetary courses of action.  At worst we are headed for a full-on economic Depression.
4. Earnings estimates are still too high.  In the first quarter of 07 the SPX estimate was for about $100 of earnings.  It still is over $60.  That 2009 number is fanciful.  The original number was "juiced" by leverage-enhanced bets.
5. Previous Bear Markets have ended when the P/E multiple has been in the single digits.  With the leverage out of the system forward earnings on the S&P 500 is likely around $40-50.  This puts the Bear Market bottom target around 450-500 once again, simply using historical price/earnings multiples and previous bear market bottoms.

I will believe we will see a sustainable recovery in the stock market when I see Ben Bernanke hung by his toenails outside the Federal Reserve, Henry Paulson in the stocks being pelted with rotten tomatoes served by angry citizens, and the bankers and other institutions who have lied about their solvency either out of business or behind bars - all of them.

Absent that I believe we are at best headed for a Japan-style scenario, and at worst, a Greater Depression.

Oh, and if the government wanted to "stimulate lending", it could have set up a Federal Bank of The United States with that $700 billion (or a bunch of banks to provide competition) and created $7 trillion in new credit, while allowing all the existing banks who made bad bets to twist on their own rope until dead.  They didn't, which tells you immediately that actually improving lending conditions into the real economy was not their intention - the EESA was in fact designed by Paulson and Bernanke to rip you off and by doing so has and will materially prolong the economic misery we are in today.

You do what you want with your money. 

I have no intention of losing mine.

The joke of the day comes from the AP and MSNBC:

"WASHINGTON - An impatient White House is serving notice on banks receiving billions of dollars in federal help to quit hoarding the money and start making more loans."

Oh really?

Let's see.

Your Treasury Secretary (you know, a guy you appointed and can fire?) put together the TARP/EESA bill, a three-page document that gave him plenary authority to do whatever the hell he wanted with the $700 billion.

You and he then made a half-dozen appearances on national television for the express purpose of twisting the arms of Congress so as to force it to pass over the strong objections of the American people.

Congress was told that if they attempted to restrict the use of the funds you would veto the bill.

We the people, in our phone calls, letters and faxes both to you and to Congress, said that we disapproved - that Hank Paulson would abuse this power and the banks would abuse our (not your) money.

Paulson in fact did exactly that.

He gave out $125 billion of that money in the form of "equity injections" to these banks without requiring in the form of contact that:

• They not pay out any of it in bonuses, dividends, or executive compensation.
• That they not use it to acquire other companies.
• That they agree to verifiable means of showing that they have used it to make loans into the economy.

The banks in fact are using the money for bonuses and acquisitions, and aren't making loans - exactly as we the people said would happen, and which your political appointee enabled through his explicit actions.

Oh, and speaking of those contracts, where are they?  Government in the sunshine?  Yeah, right - this is why the two contracts we have seen for services contracted had the pay sections blacked out.

What's even better is this tidbit:

"Indeed, the government approved PNC Financial Services Group Inc. to receive $7.7 billion in return for company stock and, at the same time, PNC said it was acquiring National City Corp. for $5.58 billion."

Got that?  Treasury approved $7.7 billion for PNC knowing full well they were going to use nearly all of it to acquire National City, another bank (that is, a competitor.) 

In other words we now have proof that Treasury is doling out money knowing full well it won't be used for lending.

And who does Hank Paulson work for Mr. President? 

That would be you.  He is a direct report.

President Bush, you're embarrassing yourself, The Republican Party, The White House and The United States of America.

The way you express disapproval with what has happened is to summarily fire your stooge Hank Paulson who has intentionally violated what you claim is the purpose for that $700 billion dollars in taxpayer funds - on national television.

This is what you do if your pique is real and not some sort of gaudy show for the American Public and press, praying that the public won't take out the fact that $70 billion of the bailout money was siphoned off into bonuses on Republicans in another week at the voting booth (good luck with that, by the way, given the market's reaction to your idiocy.  Speaking of which, that's a very nice stock market crash Paulson and Bernanke caused with the passage of the EESA, no?)

But instead of doing what any executive does when his or her subordinate screws up to such a colossal degree, blowing $700 billion of the firm's (in this case, the taxpayers) money on what amount to beer and hookers, you instead show up in the press to "chastise" the banks and urge that they do that which your stooge did not require (but could have) and in fact which Treasury has said they did not include in their demands because it would limit participation in the program.

In other words, that these banks are not lending the money was no accident.

Henry Paulson omitted these terms knowing full well the banks would not lend and you have full knowledge of this fact - and that's just from what Treasury has said in public!

Your Treasury Secretary shoveled taxpayer money at banks so they could pay out $70 billion in bonuses and make acquisitions, he did so with full knowledge that this was going to happen, and he still has his job that he holds at your pleasure.

The American public has this to say to you Mr. President and your false claim of "impatience":

Before you start lecturing people over on this side of the pond regarding transparency and open markets, you might want to take a look in your own back yard.

See, it appears that Volkswagen had a little short squeeze.

Well, maybe not so little.

See, Porsche has held a stake in the company for quite some time to protect a supply of parts that it gets from VW.  All fine and good.

But apparently unlike in the United States, there is no requirement that they be transparent with their intentions or timing. 

Or, for that matter, to be able to finance what they claim to intend to do.

So when Porsche announced its intention to raise its stake to 75% from 42.6% it set off an insane short squeeze, as the announced intended stake exceeded the firm's float.

This caused VW's stock to rise by eight hundred percent in the space of two days.

Volkswagen has been a favorite short of hedge funds.  And why not?  Automakers into an economic downturn?  An obvious short, right?  Car deliveries slowing, automaker profits under pressure.  Looks obvious to me, and did to them too.

The body count of hedgies being carried out on their shields should be most impressive over the next few days.

Two problems are immediately apparent with Porsche's announcement and give rise to questions about whether this was an intentionally-engineered event and not a legitimate business transaction:

• Their "stake" Porsche claims to intend to accumulate appears to exceed both their market cap and any ability to finance the transaction, especially in today's environment.
• There are cash-settled option positions outstanding which are not required to be disclosed under German law.

Transparent markets eh?  Hmmmm....

Looks to me like someone decided to manufacture a short squeeze, which by the way, is illegal in the United States.  Of course without full transparency its rather difficult to know exactly what was really going on, isn't it?

I have no idea if this was an intentionally engineered squeeze or whether such things are illegal in Germany or not, but this little episode does demonstrate that market manipulation, legal or not, is alive and well in Germany, and that before Merkel and others start throwing stones at the United States in regards to this little banking crisis and transparent markets, not to mention regulation and inappropriate (if not felonious) game-playing they may want to look around and insure they're not living in a glass house.

Perhaps we could start that inquiry with a discussion of Deutche Bank's leverage ratios and the transparency of their balance sheet.....

And so it begins... and ends...

"Oct. 28 (Bloomberg) -- Korea Development Bank was approved by the Federal Reserve to sell as much as $830 million of commercial paper to the U.S. central bank."

That's right - our Federal Reserve is no longer backstopping just our stuff, nor even "arranging swaplines" - now we're buying foreign commercial paper issued by a foreign bank controlled by a sovereign!

Jesus.

Yeah, I know that the South Koreans are our friends.  So what?

Exactly how far does our printing of Treasuries go? 

Now we're printing up Treasuries (taking on debt as America) to be able to buy up foreign bank commercial paper?

I've seen stupid before.  This is beyond stupid.

Significantly so.

We're not only crowding out our own commercial and private lending (if you haven't noticed mortgage rates continue to rise for this very reason) now we're taking down foreign debt, issuing Treasuries to provide the cash with which to buy foreign commercial paper issued not by a US company, but by a foreign development bank controlled by a foreign government!

Folks, this is outrageous. 

Your government's ability to fund its operating debt through taxing you has now been co-opted by The Federal Reserve without a vote and without affirmation of Congress to prop up foreign banking interests.

When we provide foreign aid to a nation Congress appropriates the money and approves of the uses to which it will be put.

This is a blatant open-handed purchase of foreign debt obligating the US taxpayer to pay through his or her taxes the interest on the treasuries issued to cover that buy - without a vote of Congress.

That's bad enough.

What's worse is that our "crowding out" is now extending to foreign banking interests.

Down this rabbit hole lies a dislocation in currency and bond markets.

Ben Bernanke is going to cause a Global Depression.

In fact, he may already have gone too far down the rabbit hole to prevent it from happening.

By the way, to those in Congress who might be reading this, you may wish to note that Ben has committed four of his five "how do I stop a deflation" ideas already - and has failed to stop the deflation.  The four are, in short:

1. Buy assets (Bear Stearns debt, et.al.)
2. Low fixed-term loans (e.g. TAF, TSLF, etc)
3. Acquire real or financial assets (TARP anyone?)
4. Treasury issues debt which the Fed then purchases with newly-minted money (Fed Balance sheet doubling anyone?)
5. Announcing an explicit ceiling on long-maturity Treasury debt.

Why is this last one important?  Because all of this coupon printing (Treasuries) along with 1-4 is extraordinarily inflationary.  I know, Ben said its not in his Congressional testimony.  He's lying.  It is.  You doubt that?  Go look at the price of 30 year mortgage money and what has happened to it in recent weeks.  Longer-term debt is very sensitive to potential future inflation and will turn upward long before the inflation actually appears, because the lender is stuck with the note for the entire period.

So how do you stop long maturity Treasuries from shooting the moon on yield? 

You announce that you are capping the yield through unlimited purchases of same. 

That is, you'll buy as many as you need (printing as many dollars as necessary) to hold the price high and yield low.

There is one problem with this - it is insanely inflationary, especially when the government is running a fiscal deficit. 

In fact it virtually guarantees a "feedback" cycle that ultimately will destroy both the government and the monetary system.

Here's why.

We currently require about $2 billion a day in foreign flow of funds into our Treasuries to fund our government's operation.  We have "gotten away with this" and "enjoyed" unreasonably low yields on long maturity government debt because we buy a lot of foreign things - most specifically Chinese toys and oil.  As we do so these governments become awash in dollars - effectively, we are exporting our (monetary) inflation to them in return for their imported goods.  To prevent this inflation from destroying their economy they "sterilize" these dollars by buying Treasury securities with them, thereby removing the dollars from circulation and dampening the inflationary impact.

But if Bernanke were to try to cap long yields foreign investors would immediately tender their bonds into The Fed, destroying this external funding source. 

Why?

Because all those dollars would devalue the currency, and in doing so foreign interests would take an immediate and permanent capital loss on their bonds, as the dollar would be worth fewer of their native currency units than it was prior to the "capping" expedition.  To avoid this risk they would both cut off their purchases of future bonds (since the capped coupon would not reasonably compensate them for the inflationary risk) and tender their present stock, choosing to buy something else (oil, raw materials such as cement, some other government's debt, etc) with their foreign capital flows - something that is not subject to being devalued at whim.

This would force The Fed into an untenable position - capping bond yields creates an instantaneous circle jerk, and the requirement for foreign funding makes the implosion both quicker and more violent than it would otherwise be.

Treasury issues bonds into the market (too many for demand) and this depresses the price and jacks yields.  To prevent yields from rising Bernanke monetizes them by buying them off the market to hold up prices and suppress yields, issuing dollars into the market in the process.  This causes the total number of dollars in the system to rise (he must print the dollars with which to buy the Treasuries, and give that dollar to someone - either a holder or Treasury which presumably will spend it into the economy), which depresses the foreign trade value of a dollar. Prices for goods (imports especially!) rise precipitously, and holders of these bonds who can't tender them to The Fed sell them, mandating yet more Fed purchases and money printing to keep up the charade. 

The inflationary impact of the dollar issuance reduces discretionary spending which in turn reduces real GDP and tax receipts.

That, in turn, forces Treasury to issue more debt to fund operations which......

See the problem?  This cycle immediately spirals out of control, leading to a Weimar Germany-type meltdown of the currency and Treasury funding path.

Down this road lies the destruction of America's political and monetary systems.

This is the problem with academics running their "theories" in the real world.  In the real world Ben has discovered that his much-vaunted "liquidity pumping" leads to commodity price moon-shots, massive distortions in the corporate debt markets and rising (not falling!) mortgage rates. 

Ben's thesis says that none of these "side effects" should have happened, but of course the historical record says that they all did, because in the real world your sphere of influence doesn't extend to people beyond your borders or those whom you cannot compel to do your bidding, all of whom are free to act as they see fit.

You've been warned Congress - Ben's "next trick", and the last of the five, is the one that can destroy this nation's political and monetary system.

PS: I've been right about the impact of Ben's previous machinations - all things he denied would happen but I said would in fact did.  Who 'ya wanna place your next - and possibly final - bet with?

The value of all assets must be allowed, even encouraged, to normalize.  This crazy attempt to prevent that from happening at all costs will not work and puts our nation's political and monetary systems at risk.

Rick Santelli this morning on CNBC laid it out in nice, clear succinct language - all we have been doing is for one purpose - to protect insolvent, that is bankrupt companies from having to come clean and face the music of the market.

The bad news is that in doing so we have destroyed our credit markets, replacing them with The Fed as the first, last and only lender, and we are threatening to destroy not only the entirety of our capital markets but our monetary and political system as well.

Let's start with one Jeffrey Garten, writing in Newsweek, who opined:

"If George W. Bush's upcoming global summit on how to fix the world's broken financial system—an event proposed by several European presidents and prime ministers—is to be a serious effort, the leaders should begin laying the groundwork for establishing a global central bank.

The idea of such an institution would have been a political nonstarter before the current debacle. The crises of the last several decades—the Latin American debt meltdown in the early 1980s, the stock-market crash in 1987, the savings and loan collapse of the early 1990s, the Asian financial blowup of the late

1990s, the Internet-stock collapse earlier in this decade—did not involve the extent of global linkages among financial institutions or the mind-boggling consequences of complex securities that we are seeing today. In none of these previous blowups did the global credit system shut down, as it did in recent weeks; in none did governments in both the industrialized and developing world intervene so massively, coming close to nationalizing the entire global banking system."

Whatever you paid for your "education" and however Yale managed to put you in their post, it simply documents the worthless nature of both, "Professor".

Let us take a trip through history - recent history.

1. The IMF already has the ability to "sound alarms."  Has it?  Why not?
2. Nation-based central banks have enabled the serial bubble-blowing, excess leverage and fraudulent, opaque accounting that created this mess.  Any or all of them could have stood up and stopped it within their borders.  Not one central bank did so. 
3. There is absolutely no reason to believe that any such "global" central bank would have any different outcome.  In fact, we have every reason to believe it would make the situation demonstrably worse, as it would have effective veto power over the actions of a given nation's central bank (or it would be as toothless as the IMF)

Make no mistake - Ponzi finance has been both national and international policy for the last 20 years.  30x capital?  Try 60x over in Europe.  They make the US look like Pikers when it comes to debt-to-capital ratios.

You have to look at why such a structure would be allowed to exist, even though every one of these people is a degreed professional and most have PhDs as you claim, sir.

Its really quite simple - most of America (and most of the rest of the world) doesn't understand basic mathematics, and therefore has no chance of defending itself against this sort of outrage.  You can lay that at the feet of our educational systems if you wish but the fact remains that the capacity to understand leverage and how it can kill you deader than a field mouse in a trap is beyond 90% of Americans and essentially 100% of the uneducated.

But the lure of that excess leverage is ever-powerful and always will be.  Why?  Its simple, really, although its not as sinister as some would make it out to be. 

Quite simply, it is through that excess leverage that the banks are able to crank up their "earnings" and thus their bonuses to both executives and employees, along with stock prices. 

Everyone loves a roaring stock market, right?

It doesn't matter (to the bankers who stole all the money) when the bubble bursts and ordinary Americans lose their retirement savings.  Heh, we've only done it twice in the last fifteen years or so, and I've only witnessed it twice, once from the inside as the CEO of an Internet company.

I raised hell then and nobody cared.  Now I'm doing it again - how long before "we the people" gets pissed off enough to do something about this serial and intentional act of robbery? 

I don't know, but I suspect we're going to find out.

How do you keep it from happening?

Really, its not that hard.

You force transparency.  From top to bottom.  100%.  No exceptions. You use existing laws to declare that anything but 100% transparency with all transactions for derivatives and other securities taking place on a public exchange is considered an act of fraud and lands you 20 years in the hoosegow.

No SIVs, no fancy derivatives, no off-balance sheet anything, no Level III "assets".  Leverage ratios must be published every quarter in your reports against actual Tier 1 capital, which is defined as cash reserves and the sovereign debt of the nation in which you operate, nothing more or less.  No MBS, no CDOs, no CDS.  I don't give a tinker's damn what the "rating" is on the security, if its not a Treasury Bond, Bill, or outright cash its not Tier Capital.  Period.

Next, reserve ratios are set by law within a nation with no exceptions.  Let the market decide within a nation as to whether people want to trust a nation's reserve ratios as "sufficient" or not.  Its none of my damn business whether Britain's reserve ratios are adequate, but it sure as hell is their business.

Finally, no more swap line garbage.  If you can't manage to run your own affairs then you deserve to have your currency and nation implode.  You can ask, but you can't demand, and foreign Central Banks should be enjoined by law in their own nation from extending any such foreign rescue without explicit authorization of their legislature for each and every instance in which it is provided, and for a specific term in each case.

You do those things and 99% of this crap goes away instantly.  People are forced to live within their means, including governments.

And the fraud - all of it - gets flushed.

If executives in Internet companies had gone to jail when they pulled this crap originally, we wouldn't have had an internet bubble.  If we had 100 bankers in prison right now wearing wide pinstripes, we wouldn't have had this bubble. 

But we also wouldn't have had an overheated stock market with "valuations" based on "earnings" that were built on a foundation of sand and fraud.

Go have a look at the S&P 500 from 1995 forward.  Notice anything? 

1995 was when the first batch of fraudsters started pulling their crap.

2003 was when the housing bubble, with all its fraud and lies, took hold.

None of this is surprising.  Robbery works great to goose earnings until you either run out of suckers or safes you can rip off.  Then that "business plan" collapses and everyone who thought they were buying into the "next great thing" winds up with nothing.

As for you Mr. Garten?  Your PhD needs to be revoked and if you're considering Yale for your kid, or you are considering Yale yourself, choose somewhere else. 

I recommend you pick an "educational institution" sporting professors that are capable of logical reasoning and accurately reflecting on how society got into a mess in the first place, instead of pontificating on "solutions" that would make a present mess 100 times worse and implode the entire world's financial system instead of just part of it when the next episode of fraud is willfully ignored for ten more years.

(This, by the way, is also why you never let academics like Ben-cough-Bernanke-cough-cough run real world institutions that have a function critical to an orderly society.  Their utopian view of the world always leads them to make errors like this with disastrous results.  Instead the wise leader picks someone who's seen the worst of the crap that the fraudsters can and will dish out and can stay at least even, if not one step ahead, of those clowns.)

On to Chris Dodd who was quoted by Mr. Nocera as saying:

"He continued: “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”"

Dodd, you're a jackass.

You were explicitly told by thousands of Americans, myself included, in multiple faxes and petitions stretching over more than a year's time that this was exactly what was going to happen if you tried to "bail out" Wall Street. 

That the money would not be used to make loans and wouldn't do a damn thing for Main Street.   That in fact the only solution that will work is full, 100% transparency.

Guess what?  We (all of us in America) were right and you were wrong.

Now man up you two-bit piece of crap and get on television demanding the repeal of the EESA/TARP law so that we the people don't get robbed for ALL of the $700 billion.  Demand introduction and passage of a bill immediately de-funding Treasury's garbage dump. 

Congress can do this whether Bush and Treasury like it or not.

After all, we now know for a fact that $70 billion will go to bonuses and most of the rest of the original $250 billion will go to shore up balance sheets and fund acquisitions - not help Main Street or homeowners.

How do we know? 

Because the banks have admitted it:

"“loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot."

It's time to man up and admit you screwed the taxpayer with your phony-baloney $700 billion "bailout' that was and is in fact being used for exactly one purpose - to line the pockets of the bankers.

SENATOR DODD: Be a man, step to the microphone here and now, admit you were bamboozled and then introduce emergency legislation to repeal this piece of dogsqueeze legislation or be branded forever as the fraud and phony that you are, suffering the justified slings and arrows from both your constituents and the nation as a whole for cheer-leading a piece of legislation that has screwed raw every American while enriching your banking buddies.

Finally, reality:

The Treasury TIPS auction today was a disaster.  The market is sending Treasury and Congress a very strong warning that you both better cut this crap out or the Treasury market may dislocate, ending the party for America entirely.

If you want to know where that nasty selloff came from in the market late this afternoon, you just found the reason.

We now sit right on the precipice of a critical break of technical levels in the market - if they fracture (and they must be expected to do so, possibly as early as the overnight hours and/or tomorrow morning) the expected move is 2,000 - 3,000 points on the DOW - straight down.

Make sure you thank Paulson, Bernanke and Congress if you have another 30% wiped off your 401k (that is now a 201k!) - they have earned your loving, polite comments.

I'll have an update to the T-Shirt (and a sweatshirt) for those who would like to express their opinion while walking around town - or to the polls.

(Before you ask, in the interest of full disclosure, I make nothing - zero - off those shirts or any other mechandise at that site.  They're a public service, not a profit center.)