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Economic Fix Still Not In


And nationalization should be last resort.

The market is all the way back to scorched-earth policy. It's again been driven by the cycle of the market knowing what it wants, being teased with the potential of the "correct" fix (Chris Dodd talking mark-to-market reform) and then being disappointed by poor policy action or muted inaction.

We had a great chance to hold the line back in August/September - and likely save Lehman Brothers. Yet the correct path -- reinstating the uptick rule -- wasn't taken. We lost Lehman and Merrill Lynch (as an independent firm), and fought to pass a likely unnecessary TARP plan that spiraled into the November lows.

Had we awoken Tuesday morning to mark-to-market repeal instead of nationalization plans, this week would have gone completely differently.

Maybe this is all a jawboning test; Alan Greenspan was masterly at this. Are Obama and his team cagey enough to throw various verbal jabs at the market to see where they'll get the most bang for the buck? If so, we're nearing high time to finally make the right call.

At the end of the day, what will do this economy the most good is a massive injection of capital to anyone who ever believed in investing - especially to anyone who ever thought a bank stock was a good investment, along with anyone who's still wondering if money is safe in the banking system.

We've seen the largest transfer of wealth in the history of the market to those that aren't invested in the future growth of America. In fact, this reminds me of a great line out of the latest Batman movie: "Some men just want to watch the world burn."

So hopefully our leaders recognize the obvious fixes, don't hesitate much further, and cease to empower and enrich those that stand to benefit the most from the decline of our great system.

Bottom line: If we nationalize before we repeal mark-to-market, let alone reinstate the uptick rule or fix the CDS market, the lows could be catastrophic.

Good luck: It seems we're fast approaching Toddo's binary event, and we may once again see the "best fix" not chosen, for which we could pay the price for years or decades.

However, if we finally do the correct things (which cost zero money), we'll have a firm low that holds and the market gains will be earth-shaking.
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