Powered By Blogger

About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, September 24, 2008

All Roads Lead To Rome...But..

Paulson is working hard to get the clearence to set up a $700 bil.
broker / dealer on the taxpayers' pad. He might even add a unit
to do merchant banking -- taking stinky credits for equity. That
is one road we all have to travel to get to Rome, so to speak.

We also need to watch the economy itself, and in so doing,
work to keep the rescue plan as separate as we can. Whether
the plan gets off the ground or not, it and the path of the
economy will eventually converge.

Even if Paulson gets most of what he wants and the plan kicks
off soon, we are still looking at a weak economy in which bankers,
relieved though they may be, will not be going out and up to the
corner to hand out cheap loans. If the plan can get the wheels
turning, they will turn slowly early on.

We also have to watch the blowback effects of the plan. This
would include its effects on longer term interest rates, currencies
and commodities prices (the inflation hedge trade). Already,
for example, we have seen mortgage rates jump up with long
Treasury yields as investors factor in more supply of the
latter to digest.

Finally, we have to watch the fate of the rescue plan itself in
the days ahead. Many folks are very angry about this, Congress
is distressed, and the two presidential candidates are super
wary (Would I rather be President or a stand-up guy who
has the courage to speak my mind?) When it comes to
legislation, the wheels can come off small wagons easily, and
since this a huge wagon requiring lots of wheels, well...

No comments: