Tuesday, March 18, 2008


The telling and retelling of the big cattle drives and gunfights out west have given us a long list of "heroes". Some of these "heroes" were rough characters that were cleaned up in the telling and retelling. The "Bat" Masterson story is a prime example. William Barclay Masterson an immigrant from Canada got his start as a buffalo skinner, a "mule skinner" and a buffalo hunter. The sad part of this story is that the buffalo hunters of the day were assassins paid by the railroads. In the attempt to avoid Indian trouble, the railroads paid to have tens of thousands of buffalo's killed. The killing was far in excess of any need for meat. The hides were purchased, partly just to make the enterprise of killing off the food of the Indians look legit.

After skinning as many as 20 buffalo a day, Masterson worked his way up to a "mule skinner". In other words he was a wagon driver. As such, his occupation was once listed as a teamster. After skinning and hauling a lot of buffalo, many of which were killed by Wyatt Earp, Bat acquired good excellent shooting skills with a "Shapes Buffalo Cannon". He also regularly practiced his 6-gun drawing skills and become a "fast draw". While still a young man, he got into a gun fight over a saloon girl. His opponent and the saloon girl was killed and Bat was shot in the pelvis. From that point forward he carried his famous cane.

Bat's list of jobs is long because he moved from one to the next. Because he felt mistreated by a US Marshall, he ran for sheriff of Ford county. He actually did catch a few bank robbers, before mishandling other matters and losing the next election. Bat was in Tombstone a few days before the famous gunfight at the OK Corral. Later, when the state of Arizona tried to extradite Doc Holliday it may have been Bat who had the idea to arrest Doc on a number of trumped up charges, let him out on bale and then to constantly postpone the local trial. Doc was never extradited because he was never tried on the local charges.

After his time as sheriff, Bat wandered from town to town while making his living as a gambler and Faro dealer. In 1889 he was involved in an election ballot box stuffing scandal and soon after he purchased a theater and married the beautiful lead actress. As a theater owner, he got involved in promoting boxing matches and traveled from territory to territory as a promoter. He was successful partly because he developed skills as a sport writer. He had a knack for making a small story into a huge tail. In one famous case, in order to hold a boxing match in Texas, he influenced Judge Roy Bean to hold the match just across the border in Mexico.

Bat got to know Teddy Roosevelt and was appointed a political patronage position that lasted from 1908 to 1912. He spent the remaining years as a writer for the New York Telegraph where the legends of the west were raised to new levels.

Can you picture Gene Barry as a buffalo skinner, teamster, or buffalo "hunter"? If you have watched the TV show, you have undoubtedly gotten a false impression of "the man". Bat drank liquor like a fish in water and was known to stagger down the street after a late poker game. You can read all about Bat on several web sites, including the Wikipedia site. A quote you will find on a number of them is, "it was Bat's art of self promotion more than any actual accomplishments that likely added to his notoriety".

Again, while it was true that he had a "fast" gun, he is known to have killed just the one man in a bar fight over the girl. The speculation over where he got his "big" money includes his connection with the railroads. Some stories indicate that he was one of the first Pinkerton railroad agents but this was at most a very short period of time in his life.


Between now and the election Ben Bernanke is likely to be promoted as the latest "Great American Hero". After holding his foot on the brake so long that the economic engine ran out of gas, Ben was slow to react and allowed a relatively minor problem escalate into a crisis. All during the "crash" Ben ignored the law that allows the FOMC to open the discount window to the broker dealers. Only after Bear Sterns was in deep do did Ben act and when he did he flung open the window to JP Morgan so that it could gobble up assets at pennies on the dollar. The cut throat competition between the "big boys" goes back for centuries and old man JP would be proud to know that Jamie Diamond was able to follow in his foot steeps, "stealing the assets of the competition".

Big Ben comes off as the savior of the US economy. By the time the election rolls around, a number of voters will decide to support republicans because of the risk that a democratic president might shuck Ben for another "new" fed chairman.

It is difficult to speak out against a hero. It is easy to come across as a naysayer or even a crack pot. As all good investors know, investors run in crowds or herds. The old Candid Camera elevator gag is a good illustration. Candid Camera put 8 people on an elevator facing the back. When the elevator stopped at the next floor, where one person was waiting to get on, the pressure on the new person proved to be incredible. If he faced the front, one or two of the others would give him ugly looks over their shoulders. The "stooge" often faced the back immediately or after one of the ugly looks. If not by then, at the next stop one or two more people would get on and fact the back. In almost all cases, the stooge would turn to the back.

Yes, I am thankful that the FOMC has finally opened the discount window. I am also thankful that window borrowings are being "sterilized". In Fed Speak, "sterilized" means that the FOMC is not printing the money to loan. Instead, the FOMC is loaning money directly to the parties that are in the most need while buying back in the same amount of loans from those who are in better financial shape. In other words, extra high inflation is not going to be the outcome of the FOMC's current actions.


Inflation is nothing more than a ratio of money to goods. The fear has been that the fed is printing to much money. The reality is that the short term fear of recession has caused businesses to hold off on production. The fear of business is that they will make a lot of goods that must be financially carried during a long down turn. By keeping inventories low, prices are pushed up. If you only have three widgets in stock, you are not willing to bargain much even if the widget is a high priced and high margined item.

There are two sides to the extra low level of inventories. On the one hand, short term inflation is created. On the other hand, the economy must expand rapidly to rebuild inventories. One exception is the housing industry but even here the level of new construction is now below the level of absorption. With the number of homes on the market gradually starting to go down, the pace of sales will jump when buyers realize that they must buy or miss the best bargains.


It is a critical point for investors to understand that inflation is a lagging indicator. The above epistle on low inventories is part of the dynamic involved. Inflation goes up as businesses pair back production in fear of recession. Once the fear goes away, the production of "extra goods" brings down the price.


There is plenty of time to promote Ben as the "successful economic savior". The big cuts in interest rates, which were delayed until late January, happened in time to boost the economy about the same time that the $600 "helicopter dollars" will fall from the sky. The economy will be doing fine by the summer and extra fine by the fall. Incumbent democrat and republicans went along with the "helicopter dollars". The timing will be good for incumbents and perhaps good enough to give McCain all the boost he needs. If the economy is in "recovery" there will be a natural inclination to not "change horses in the middle of the stream".

Gene Barry, Bat Masterson and Ben Bernanke are "good guys". Bat was a colorful figure. TV nor movies can capture all the rich detail of a personality. Over then next few months, we will get the "TV" version of Ben Bernanke. The economy has been saved. Bush, Paulson, Bernanke and the congress will all share the credit. Investors who buy now will reap a portion of the financial benefit. The common investor has no chance to beat JP Morgan but we can all go along for the ride!