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Merrill Blows Smoke, Sets Off Alarm


Banks refuse to give straight answer on liquidity.


Hello from New York, where something rather obvious occurred to me over the weekend - and Scott Reeves' column this morning confirmed it. We -- snarky writers, TV talking heads and human beings in general -- are given to making snap judgments about others, particularly those in power.

One of the things that first attracted me to financial TV was realizing that CEOs, presidents and, yes, even Federal Reserve Chairs are seldom purely good or purely evil. The "great conspiracy" of the financial world is that there are no gods or demons - just a collection of men and women trying to do their best, without trashing their reputation in the meantime.

Ratatouille had it right: Negative reviews are fun to write and easy to read. The real talent lies in recognizing the best of the breed - and betting that their talent will somehow win out. Something to consider while enjoying the theater of the financial witch hunt.

Here's what I'm hunting for, instead of easy targets:

  • I generally don't link to the Fast Money videos unless I think there's a real lesson to be found. If you're still fighting for the long trade in the Potash (POT) of the world because my "the chart is busted and we didn't just invent food" screed seems too simple, run, don't walk, to watch real live North Dakota farmer Roger Nesham on last Friday's show.

    I love Roger. He gives great TV, and he's walking proof that the folks in the fly-over states can be pretty sharp - regardless of what the East/ West Coast animals out here may think. Roger told me and the rest of the crew that he'd be using less fertilizer intensive crops next year, because "the fertilizer companies are just charging too much." That's the kind of comment which should send chills up the spines of you PEG-ratio buyers of Ags.

  • We old-timers can remember the days when Russia invading satellite nations to impose various forms of will was big font news. Global growth. (NB: the italics are to suggest not emphasis but rather as much contempt as I can verbally heap on 2 words. I've been told that level of contempt is relatively high).

  • China is down another few percent again today. Goldman Sachs (GS) is out with a report claiming the Olympics are generally a hindrance to the economics of the host country. Let's just say that observation seems like a no-brainer - unless you were hoping the Police and some Live Nation (LYV) 60-year-old were going to be holding concerts in the bird's nest every other night between now and 2020.

  • What was the point on the whole "just guys" thing in our preamble? Simply this: I chided John Thain of Merrill (MER) for his waffling the other day with Maria. Let's just say I thought Mr. Thain seemed a bit evasive - and the Muni jamback that hit Merrill (and others) a couple days later didn't assuage my feeling.

    Then I saw the head of Fannie Mae (FNM) trying to navigate the same verbal rapids last Friday. Suffice it to say, Thain suddenly seemed a relatively polished deliverer of a very difficult bit of financial news.

    Boiled down to its core, all the financial CEOs are saying the same thing: "We don't have liquidity 'on hand.' It's all lent out. A run on the bank will kill us and you'll get nothing." Saying "I don't know" is anathema to bank executives; learning how not to say it is very much an art.

    So if you're looking to "play leadership" as an investing tool, you need to keep the context of their markets in mind when giving out grades. We'll have more/different ideas on this concept tonight on TV (I'll be on all day today, as it turns out).

  • But just because I'm running out of town doesn't mean I don't have a second to send you the greatest "We don't know our current liquidity situation but, dang it, we're going to make it as long as we stick together!" speech from a bank president ever caught on film: George Bailey defending his Bailey's Savings and Loan (CAPRA).
    That Mr. Potter was a discredit to bald men everywhere.
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