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Monday Morning Quarterback: The Liberty Belle


What's happened to America?


"When illusion spin her net, I'm never where I want to be.
And liberty she pirouette, when I think that I am free."
Peter Gabriel

Chasing Liberty. It's a fantastic concept at face value.

Give us your tired, your poor, your huddled masses.

If only we were talking about immigrants rather than CEOs.

If only our founding fathers foresaw the liberal interpretation of liberty.

If only…

What happened to America?

Rather than bridge the gap of cultural diversity, we've put up walls.

Instead of United States, party lines divide us.

In lieu of freedom, we live in fear of failure and poverty.

Chasing Liberty, one step at a time.

At least that was the plan when we started.

It would appear that Lady Liberty-at least how we were taught to love her-has foundational cracks.

With the election less than four months away, the eyes of the world are upon us. That lens isn't lost on the Boys on the Beltway.

As the master plan gains clarity, their agenda seemingly has two initiatives, in no particular order:

  • Break the bearish credit bets made by global macro funds by squeezing stocks higher so Corporate America can issue secondary offerings. That will dilute equities but offer a respite in the credit markets. This is the primary objective of the enforcement of the short-tick rule, explained here and here, and chatter in the marketplace-reported today, first discussed on MV Friday-is that the SEC might extend this to all equities.

  • Break crude, with an eye towards "par" by November. While empirical evidence shows little if any historical relationship between the price of oil and equities-the 10-year correlation between crude and airlines is negative .246 (very mild)-psychology surrounding lower oil could conceivably shift sentiment. Look for Texas Tea to continue its 15% pullback this month and mysteriously migrate towards $100 in the months ahead.

Ironically, the effort to squeeze stocks higher with an inclusive rule would have dangerous repercussions for global financial markets. The removal, or eradication, of shorts while facilitating the short-term goals of the powers that be, would remove important and necessary layers of demand.

Once that ban is lifted, the conditional elements of a crash would then be in place.

Hey, don't shoot the messenger-I'm just calling it as I see it. And lest you think I should be fitted for a tin foil hat and sent to a grassy knoll, take a peek at the past.

History doesn't always repeat but it often rhymes.

Some Random Thoughts:

  • So KKR wants to be a public company, eh? That's bullish, right? Maybe-as we learned with Fortress Investment Group (FIG) and Blackstone (BX), these guys don't get paid the big bucks for nothing.

  • Interesting column in the Sunday NYT Business section on Hammering Hank Paulson. No, big dog, I don't have any answers, per se, but I'll remind you that as a U.S. citizen, it's not only my right to question our leadership, it's my obligation to do so.

  • There's no shame in admitting that it's hard Minyans. There's only shame in ignoring that it's hard.

  • I'm not involved in MasterCard (MA) or Visa (V) but I have a high degree of confidence both will get dinged before the credit crisis works through the rest of the phases. It's not a default play-it's a processing play. Women be shopping, and they always will, they'll just be shopping less.

  • Is DJ Jazzy Jeff the modern day urban equivalent of Art Garfunkel?

  • In a normal world, I would prolly have pressed Fannie (FNM) and Freddie (FRE) on Friday's S&P news. While the stocks will likely be nationalized in time, I don't feel like trading against Hank Paulson. His pockets are much deeper than mine, which is sorta weird because his pockets are mine.

  • Cash America (CSH), the pawn shop chain, mentioned on its earnings call that refined gold sales were up 60% year over year. That, coupled with the uptick in people prematurely tapping into their 401(k)'s, is a manifestation of the credit crunch that's flying beneath the radar.

  • If you've been bullish and bearish and bullish and bearish and bullish and bearish today, do yourself a favor and take a deep breath. Death by 1000 paper cuts is no way to go through life, son.

  • And look on the bright side--it's summer time!


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