Wednesday, January 27, 2010

State of the Union: FFF

Alright, it's a poor poke at a Vin Diesel movie I never saw, but by definition it must be terrible. Who knows, maybe we would be better off taking financial advice from Samuel L. Jackson than the cast of clowns who have run us into the ground repeatedly over the last 30 years. Tonight, Obama will give his State of the Union address, and supposedly fess up to the mistakes he has made over the first year of his presidency. My guess is that he will couch these in terms of necessary evils and unprecedented financial disasters that framed his decision making. Economist Michael Hudson thinks the rhetoric will be much worse, with any talk of recovery or recession implying that we are fighting to get back to the previous normal. Why would we want that?

There is zero chance that Bernanke will not be reappointed next week. We saw briefly last week what even a hint of that possibility will do to a fragile market. Geithner will be roasted this week before Congress, but no change is imminent there either as they will find no wrongdoing with the guy who was running the NY Fed while daily crimes were committed. But perhaps a paradigm shift is in order as the "Volcker Rule" is being pushed forward. This will be a blackhole as well because the odds of GS losing their prop trading desk are also zero. C'mon! The banks that have been so lavishly bathed in our money and who are the largest campaign supporters of our congress members are going to lose one of their biggest avenues of revenue?

So I still say sit tight. Expect a brief pop next week when Bernanke is reaffirmed and laugh at CNN with me while reps like Barney Frank seek to limit the size of FNM and FRE, the very institutions he allowed to behave like hedge funds.

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