Posted by David Gaffen
* Sure, stocks put together a rally, but it wasn’t much. Equities could not maintain the day’s highs, which it threatened on three occasions during the session, and the action was middling, as if investors didn’t have the confidence to rebuild positions after Tuesday’s selloff. The reasons? Those assets that can’t be valued, the securities that can’t be sold, and all the other “things that we can’t do right now.” One could say this has a broken-record quality to it, but by now, all of the records have been broken, and the market is moving on to the cassettes and the eight-tracks. “What they need to focus on is housing – that’s the key to solving this problem,” says William Rutherford, president of Rutherford Investment Management in Portland, Ore. “They [bankers] don’t know where the bottom is, so they’re being defensive.right now, there’s no plan, so it leaves us bewildered, befuddled.” Word that the economic stimulus package looked on track to circumnavigate the halls of Congress helped boost sentiment in the latter part of the session, in both stocks and bonds, but the market remains decidedly range-bound. Action in gold and Treasurys supports the view that investors remain concerned about the economy. The 10-year note rallied, dropping its yield to 2.76%, even though demand at the new auction suffered a bit because of its size, and gold gained $30.10 per troy ounce to close at $943.80, highest close since July 22, 2008.
Ok, maybe it isn’t such a good idea to listen to these guys either.
* Early in the ” Wall Street Eight” hearings on Capitol Hill, Rep. Spencer Bachus, R-Ala., the top Republican on the House Financial Services Committee, told executives that working “as partners” would be the best way to address growing public anger. Perhaps. But it would also be the most detrimental, counterproductive way to address the actual problems facing the U.S. economy and financial system. Most of the terrible decisions made in Washington with regard to regulation of the banking industry in the last decade-plus have been in conjunction with top bankers, and this is the result. It’s easy to thunder like former Georgia Gov. Zell Miller (or rather, Will Forte’s impression of Zell Miller) before the cameras at a big splashy hearing, but a bit more insight a few years earlier would have been preferable. Decisions to eliminate leverage requirements that allowed banks to lever their balance sheet to astronomical levels, breaking down the Glass-Steagall barrier, and the hands-off approach to the derivatives market were all made at the prodding of the nation’s bankers, most of whom, as it turns out, had no idea of the risks they were taking on their firm’s balance sheets, and continue to hope the problem will merely go away with time. “History shows that modern bankers don’t understand the macro-economic problems of banking crises and have, anyway, major conflicts of interest,” writes Andrew Smithers, president of Smithers & Co., an investment advisory based in London. “They are thus among the most unsuitable people from whom governments should take advice about banking.”