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 !!!

Tuesday, September 16, 2008

1. Monetary Policy, 2. AIG

Monetary Policy
Bedrock fundamentals of monetary policy such as the trends of
production and capacity utilization (both down) and private
sector data from purchasing managers did lend support to a
mild cut in the Fed Funds Rate from the current level of 2%. I
did not anticipate one because the FFR% is low enough already
and also because the Fed may not wish to touch off more long
side speculation in commodities and short side interest in the
US $. Since the acceleration of inflation over much of 2007 and
2008 reflected a bubbly surge in commodities, the recent sharp
sell down in same will bolster real incomes and relieve pressure
on profit margins for many businesses. As I see it, the important
work for the Fed now is to provide a sensible, moderate growth
path for monetary liquidity.

The apparent stupidity of this once high quality company in
recent years has been breathtaking. And here now we have a
$1 trillion enterprise at death's door sitting down with the Fed
to arrange financing to give it time to figure out a survival plan.
On top, this is taking place during the closing 50 or so days of
a presidential election. So, AIG is holding a gun on Bernanke and
Paulson. If the feds flip these creeps off and the markets tank,
the election could go up for grabs. So the feds are stuck with
trying to keep AIG afloat in a way that finesses the bailout issue
at least until after the election. I am sure discussions are
rather interesting.

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