No… I’m not talking about raising taxes on the poor middle class working stiff earning between $20k and $100k (95% of the population), who goes to bed every night worried sick about how to pay not only for the mortgage, but also for next weeks food.  I’m talking about raising taxes on those individuals earning over $350,000 per year. I’m also talking about cutting subsidies to already profitable farms. I’m talking about getting back on mission and going after Al Qaeda, and not occupying Iraq.  ( I ask you seriously …If I gave you a trillion dollars, do you think you could bring to justice Osama Bin Laden? - isn’t that the reason we’re in this mess in the first place?)

I’m talking about cutting back spending on anything NON ESSENTIAL to the operations of the U.S. Government. Look out entitlement programs…you’re in trouble in my recipe.

When was the last time anyone heard of government layoffs or thousands of jobs being cut from any one of the U.S. Government departments. These days it seems like the safest place to work…the U.S. Government.

 Consumer confidence (key word ‘confidence’) is part in parcel at its lowest level in over 26 years because of that letter in the alphabet “W” in the White House who infects the citizenry with about as much confidence as a good scare of bird flu.

Anything less than the above attitude, will only prolong the pain. And believe me, because I don’t believe there is one elected official with the courage to do so, I think we are in for a lot of pain over the next 2-4 years. Yup! you heard me right - 2-4 years OR LONGER!  before the U.S. economy is anywhere near what it once was.

If you’re in finance, a stock market investor, or just a plain channel surfer….yup, a channel surfer in the morning, I gotta believe that watching Bloomberg, CNBC, MSN, CNN ….all the “financial channels” has got to be one of the most boring - even tortuous - under-goings in life.

 Every day, there’s the cute guy, or hot woman asking the absolutely most absurdly obvious questions of ‘wall street analysts’ - those old men from Dickens fame who wore green eye shades, worked until midnight, and only got yelled at by Scrooge in the morning for being 5 minutes late.

 OK….my point…These “experts” NEVER get it right. And in many cases they don’t even come close. Take this morning for example…OIL tycoon T Boone Pickens admitted that he - the granddaddy of all oil traders” got it wrong, in a recent bet he made in the market.

 Bottom line, if your having too much fun in-the morning during your workout, or just want a good laugh, at the sheer stupidity of these talking heads trying to predict the future, turn the dial to any one of the three channels that I just mentioned. Of course, if you tune into CNN, you’ll get a bit more blood and carnage out of Iraq.

 What a way to start the day eh?….watching idiots who are worse then weathermen at predicting the future of the stock market, or watching an Iraqi child or American Trooper being rushed to the emergency medical care facility. 

  

For as long as I’ve been pacing the corridors of Wall Street …now after 30 years and considered what Eddie Murphy would say is - the ‘old man at the club’, I’ve learned a few things; one of which is sometimes bad news isn’t always so bad and may even be good news / opportunity….Emphasis though is on sometimes!

This morning the big news is that Merrill Lynch is reporting a larger than expected loss, with lower revenues, and the company in response will be cutting 4000 jobs. The CEO - John Thain is a personal friend of mine, as I got to know him when he took over after Dick Grasso at the NYSE. Well, my point is this, John is no shrinking violet, is able to make the tough decisions, and is a strategic thinker. Merrill has ample cash on hand to whether this and future storms, and well, I’m a believer in this man, and his team.

 So… this is, in my humble opinion, one of those ‘bad news’ stories that does not headline - “The End is Near” - the end of Merrill Lynch that is.

 Personally, I’m a buyer, and a believer in John Thain and the fabulous team he has assembled at this fine American Brokerage firm.

The Dow is up over 200 points as investors are heartened by encourtaging earnings news from the likes of non other than two banks JPMorgan and Wells Fargo. While the earning reports weren’t great,  that they weren’t disastrous is what got everyone into happy mode. 

 But while I’m watching the news ticker, I’m also watching the leader of the free world, President George Bush talk about global warming, and how “we are going to stop the growth of greenhouse gasses by 2025″. WOW…that’s pretty ambitious….2025.

 His lack of faith in the American people’s inability to stop the “growth” in greenhouse gases by say 2015 is so underwhelming, so uninspiring, that it literally makes me sick!

 Whatever happened to the ‘can do’ spirit of this great country?

 While I’m on the ‘can do’ spirit of the American people, I’m wondering if the Congress might catch a bit of ‘can do’ spirit and cut spending. If the dollar keeps falling pretty soon a hotel room in New York which would cost $250 a night, will cost $600 in London.

 Thanks George…you’re doing a great job….I know what I would like you to do, and that is go clear some brush at the ranch and really try … no I mean really, really try not to do any more damage than you have already to this country.

Yesterday whilst riding the subway with a good friend, we were talking about the fact that there seems to be no great deterrent to the sniping and killing of American Soldiers in Iraq. He has an idea, which I like very much.

 The Idea:

 Every-time an American or coalition troop is killed in Iraq, the United States takes 100,000 barrels of Iraqi oil and uses some of the proceeds to give to the family of the trooper who was killed, some of the proceeds to give to an Iraqi citizen who fingers the murderer, and some of the proceeds to feed the hungry and homeless in America.

The killing of 10 troopers = 1 million barrels of oil or at $112 per barrel = $112 million.

Maybe then the Iraqi government would get some spine, deal with the bad actors and create some stability within their country.

 Walter Schubert

ps….the individual who gave me this idea, wished not to be named as he is a prominent figure on Wall Street.

OK….so you haven’t paid your mortgage for 6 months, the bank is going to foreclose on your property, and the buyer that wants to ‘buy on the cheap’, can’t get financing because his credit score isn’t above 720.

Round and Round they go, and where the “bottom” in the housing market is - nobody knows. But one thing for sure, I’ve noticed on my block 3 homes that have been “Under Contract” for over 6 months. What is this….a lawyers dream? A 6 month contract negotiation? Maybe.. God knows how lawyers like to debate what the definition of “is”  is.

But really that the banks are still, after unprecedented and gigantic infusions of capital from the Federal Reserve Bank, the commercial banks are still unwilling to make loans.

The FED needs to get tough and attach some strings to this ‘bail out’ party punch bowl  thats been gushing hundreds of billions of dollars over the past 6 months. 

Either the Federal Reserve - shut down the party, and stop bailing out commercial banks, or they bring out more bug juice with the caveat, that “they” the commercial banks start lending ASAP. 

No more FED money until banks start lending! 

I used to have a friend who once said that the only ‘bottom’ he picked had blond hair and wore a bikini. He later married her, and well…what he thought was the ‘bottom” wasn’t and three years later he was divorced.

This is to say that, yes…there is some much needed ‘feel good’ coming back into the market with the recent rally and Bear Stearns taking the fall for the rest of Wall Street. But the market is having trouble breaking through 12,650 on the Dow Jones Averages. The first quarter earnings parade is starting to march down Wall Street, much will be determined by the first quarter earnings reports as to whether the current market stability can be sustained.

Today, everyone is talking about the hostile takeover between Microsoft and Yahoo. Where’s Judge Judy when we need her. Now that’s would be entertaining, because this hostile takeover and the back and forth isn’t very ‘high drama’ for the average Joe on Main Street.

This week the big economic reports that will drive the markets are Pending Home Sales due out tomorrow, Chain Store Sales on Thursday, on Friday the Consumer Sentiment data.

 All in all…I remain a seller on strength…that means any rallies, I would rather sell into THIS uncertain market - (we’re not exaclty climbing a ‘wall or worry yet’). Of course, if someone asks me if I believe we’ve seen the bottom in the market, I’ll have to punt on that one.

Now if someone asks me if I’ve seen a bottom … well….from a distance of course I have !

  

The recent collapse of Bear Stearns, and all of the pain and anguish that has accompanied it, mainly by the employees and retirees should heighten the call for a review of the line between greed and good business practices…and ‘ethical’ behavior.  The shareholders took this one on the chin both the institutional, and the widow Masterson. I feel terrible for this porr woman who was living off of the dividends, and am just a little more than a tad angry at the institutional investor.

Between the board of directors, and the institutional investors, there is one word which explains this whole debacle perfectly - “greed”.

 Financial Services and Wall Street can be a wonderful place to work; to earn a respectable living, even by most standards, an incredible living. But like speed - “greed” kills too.

As the regulators, members of congress, market participants, boards of directors, and institutional shareholders all gather round the table of feigned or real remorse, a heaping dish of humble pie MUST be served up for all to eat. And then there ought to be a large pitcher of Kool-Aid — enough for everyone at the table.

 In real terms what’s desperatly needed is something very much like the ’speed trap’. But that suggests a speed limit doesn’t it? 

The market needs a speed limit (margin limits to be raised) and ‘greed trap’ - and regulators armed with a technology gun, and a set of stiff handcuffs, should any Wall Street big shot think that he can greed anytime he or she wants to. 

Heck the demise of the trading floor of the NYSE was because the world wanted to buy and sell stocks in “milliseconds” instead of minutes.

The desire to ‘go fast’ trumped’ the desire to get the best price which means going slow sometimes.

 The need for speed, and the ugly and base human emotion of wanting more and more right now, is what has caused Bear Stearns to collapse, the sub prime mess, and most other current economic problems.

 At the risk of sounding like a spiritualist…the main ingredient to a permanent fix of these kinds of problems, is to realize that happiness and fulfillment in life, real success, is not measured by the size of ones bank balance, but by the size of ones heart, and what one does with the blessings that have been given - yes ‘given’ to them.

 Everytime I meet a guy from Wall Street who was born on 3rd base and thinks he hit a triple…I smile and say to myself…’its just a matter of time, before he gets thrown out of the game!

Respectfully,

Walter Schubert

U.S. real consumer spending was unchanged in January for the third time in the past four months as the economic slump deepened. Inflation jumped in January, eating away almost all the increase in personal incomes. Nominal spending rose 0.4%, the Commerce Department reported Friday, but the 0.4% increase in the inflation rate left real consumer spending flat.

OK folks out there in the heartland… While Chairman of the U.S. Federal Reserve this week testified before Chairman Franks Financial Services Committee that he was more concerned about prospects for growth in the economy, he was also as a secondary concern, worried about the prospects for inflation as money became cheaper. Then…add on top of this the employment figures that are starting to show a slowdown…and we have one of the more scary scenarios known as “Stagflation”. This is when unemployment his high, inflation is high, economic growth is slow, and interest rates to combat high inflation begin to rise. This ain’t a pretty picture for sure.

I can’t for the life of me understand why President Bush, and other administration officials are still saying that we aren’t in a recession. Geeez…with gas at the pumps solidly above the $3 level, there isn’t much room left for the American Consumer to purchase anything other than gas and food.

What are these idiots thinking??

The only recipe to stave off a deep recession is to cut spending dramatically. That’s why we need to get out of Iraq as soon as possible.

That’s why we need to reduce the U.S. Debt because of the interest payments.

That’s why we need to cut back on entitlement programs.

That’s why we need to legalize all drugs…the war on drugs is a farce and designed only for us to pay for a larger police force and to keep petty addicts in expensive prisons.

That’s why we need to stop funding ridiculous research projects like how to grow a better mushroom

That’s why we need to stop funding big agriculture with subsidies.

I could go on… but I think one can get the point.

OK…I’ve been not only a bear in this market, selling on any strength, and holding much more cash than normal - like 50%, but actually going out on a limb and talking about it. (see previous posts.)  Anyway…today, as the price of oil surges once again above the $100 per barrel mark, only confirms what I believe to be another nail in the coffin to the recession argument.

 These ’stimulus’ packages, and tax rebates, and other ’shots in the arm’ are no match for the clubbing that the American consumer is getting when gasoline is over $3.50 a gallon.

All the talking heads on Bloomberg, and CNBC, all the comments from Paulson, and Bernake, add up to nothing. These people need to level with the American people by telling them that the party of borrow and spend is OVER…Finito, Fertig !

There’s a big jug of Kool Aid that must be consumed. The Kool Aid is the acceptance by the American people that ‘entitlement programs’ and the endless spending by the government is unsustainable. Spending must be cut dramatically, and taxes in some form need to be raised.

 May I suggest the following: A 10% tax on gasoline. This would push the American people to get off oil consumption. The use of proceeds would go towards reducing the debt, and research for alternative energy sources.

 Next blog will talk about how to solve the immigration problem. There’s money the be made there too.

 Sorry to sound so mercenary, but sometimes reality sucks!

Walter Schubert