The New Private-Public Bank

In the next few days, Treasury Secretary Timothy Geithner will unveil his plan for public-private partnerships that will begin the process of removing toxic assets from banks balance sheets. The final plan is still being formulated but the concept would be for the government to finance and participate in the purchase of these assets. The private sector will have to invest some equity in these deals and will help determine the purchase price. If this process is successful, a market will develop for these toxic assets and the banks will begin to clean up their finances. The private investors such as hedge funds will only get involved if they believe that they can trust the government to stay 'out of their business'. The AIG bonus debacle has to fade from view so that we can get back to solving our problems.

Random thoughts....the first quarter ends in nine days...earnings reports for financial companies will be released around April 10th or so....look for upside surprises from most banks....optimism would help.....how will gold and the dollar behave for the next few months?...please leave Geithner alone and let him live....

Fifty Days that may change the world

In a year when so many baby boomers are approaching FIFTY years old, it is the next FIFTY days of President Obama's administration that will make or break the back of the 'Great Recession' of 2008-2009. The President has realized that leadership and a positive attitude are important ingredients for success in dealing with the economy.

The politicians are beginning to understand and deal with some of the basic issues that have sabotaged the economy. We can expect the so called 'uptick rule' to be reinstated within a few weeks. This will make it more difficult for short sellers to drive down the price of stocks. I also expect a revision in the 'mark to market' rules that will add some flexibility in dealing with the write downs of bank assets. The fiscal and monetary stimulus that were instituted in the last six months will begin showing some progress.

The most important policy decision of the Treasury will be the plan for dealing with the 'toxic assets' that are on the balance sheets of most banks. These policies must be viewed positively by Wall Street so that we can begin the process of healing our banking system. I expect the President and his staff to spend as much time as necessary in the next few weeks to make sure that the plan will work. Hopefully, the next FIFTY days will put a smile on all of us as we head to the stores to start spending money again.

Random thoughts.....I think it is time for the press and the politicians to stop worrying about the bonuses that everyone is getting on Wall Street...it is time to calm down and start spending some money....

Dear Mr. President Please Act Now on my plan

President Obama has the power to change the course of the Great Recession of 2008-9 by following these steps:

1. Suspend the accounting rule of Mark-to-Market for two years. This will take the pressure off of the various financial institutions that have seen their Balance Sheet collapse.

2. Suspend Capital Gain taxes for any individual buying United States stocks in 2009. Give the American people a chance to invest in their country and keep 100% of all gains so that they can recoup some of their losses.

3. Use the rest of the TARP money to make sure that the banking system doesn't fail. There are a number of reasonable plans to remove the 'toxic assets' from the books of major banking institutions. Make a decision by Monday on whichever method will satisfy the financial community.

4. State that the US Government will not dilute any Senior Corporate bonds in any restructuring of a non-bankrupt Corporation. In addition, instruct the Federal Reserve to begin purchasing investment grade Corporate bonds next week (at least $500 Billion).

5. Force General Motors into a pre-packaged bankruptcy that is financially supported by the government. Inform Chrysler that they are on their own.

Mr. President, if you take these steps within days you will create a stock market rally of 25%.

In addition, you will stop the downward spiral in the world's economies. People around the world will have confidence in your ability to lead and to create confidence. It is time to lead us out of this great recession.

The Award for the Best Actor in a Financial Crisis

We will probably be singing the Slumdog Millionaire song tomorrow as this picture will be crowned best in 2008. Why not think about the nominees for best actor in a financial crisis? We would have to think about Alan Greenspan, George Bush, Ben Bernanke, Timothy Geithner, Barney Frank, Hank Paulson and Barack Obama as potential nominees. Barack Obama is clearly the winner for best political actor in 2008 as he convinced a nation that he could change the course of America and the world. The best financial actor is none of the above. President Obama chose Timothy Geithner as Secretary of the Treasury so he could lead and provide confidence for markets and consumers. In his debut performance a week ago he clearly failed on all counts as markets collapsed. Secretary Geithner has one more chance this week to convince the world that he has the answers and the ability to solve the banking crisis. Hopefully he will succeed and become the winner of the best actor in a financial crisis for 2009. My nominee and winner would have been Paul Volcker as he would have provided the confidence and leadership that the world needs. Lets watch tonight and see if the winner is really a wrestler.

Random thoughts......The 'Dow Theory' gave a sell signal late in the week indicating a Bear market that can still decline by another 20% or more....it sounds like we are very close to a rally

in a bear market...

Will Obama go Swedish

The Dow was down almost 300 points today as it approaches the low reached in November 2008. The decline today was due in part to the probability that the 'Swedish Model' for banks (nationalization of the banking sector) will be approved by President Obama. The banks would be forced to write down their assets to market which would effectively wipe out their equity. The Government would then recapitalize the banking institution or sell it off. Some economists believe that this would be bullish for the markets.

Random thoughts....GM & Chrysler want more $Billions and promise more employee layoffs....Obama signs the Stimulus Bill and the market goes down 300 (sounds like what happened to George Bush)....Gold is approaching $1000 as the Euro heads to 1.20....Obama unveils his plan to end home foreclosures tomorrow...The Dow may go down to 7,200 this week...

Suspending FASB 157 true or false?

This Federal Accounting Standards Board Rule requires all publicly-traded companies in the U.S. to classify their assets based on fair value. Banks have had to write down billions of dollars in hard-to-value level III assets following the credit crisis. This Rule became effective after November 17, 2007 and requires commercial banks to value securities and loans quarterly according to current values whether or not the institution planned on selling the asset. Marking to market creates these 'paper' unrealized losses. This Rule has contributed to the credit crisis and the weakening of our banking system. There are rumors today that the Obama administration may alter this concept in some instances.

Random thoughts....The Senate will pass the Recovery Act by tomorrow the unemployment report will be horrible....January shows an economy in depression...Obama will begin to change psychology next week with the Stimulus bill...the market is holding 8,000....we could get a rally beginning next week that breaks above 8,600....leadership is what counts...

Zero Capital Gains

I have examined all of the details of President Obama's Recovery Stimulus Plan. There are tax cuts and spending plans . Why doesn't the government suspend capital gains for investments made in 2009. I propose to eliminate any capital gain taxes for anyone investing in stocks, housing, or a new business. This suspension of taxes would only be good for 2009 investments. Whenever these transactions are sold, ZERO tax would be due. As January ends, we have not had an Obama rally! The next three months will continue to exhibit depression in the economy. It is time for a plan that makes sense!

Random thoughts...the market holds 8,000 but it will be tested again...all the news is bad and depressing....no demand for anything.....what if Obama's plan doesn't work?......