Monday, September 22, 2008


My "Old Merrill Friend" hit the bullseye again.


Amazing news over the last two weeks. The old guard of brokerage firms is vanishing. I believe the real problem for the "Old" Wall St. is the brain and talent drain from the rise of the hedge funds and private equity firms. They have supplanted the old trading desk actions of the Goldmans and JP Morgans. This is a good example of the old "Hong Kong" style of capitalism where the trading is unfettered by many oversights that a large country such as US demands. This revolution to the new traders is not a bad thing. Liquidity can be supported with current times the exception.

Hopefully we should see the financials doubled from here in five years. Not a bad move for the patient.

The only place he missed was in his projection of 5 years to double. Many a financial stock has already doubled from the bottom and many more will double in the next year or two.


The price of gold and the price of oil reflect the movement of battleship groups in the direction of Iran. Ahmadenijad has once again declared that he will not give up on the production of nuclear fuel and the IAEA has evidence that he has tried to make nuclear warheads. Germany, Russia and China are reportedly not convinced. Only a very few know what threats have been delivered by the USA. We know the battleships have been deployed but we also know they are taking their time.

Oil is in abundant supply but the price has bounced anyway. Inflation expectations, as measured by the bond market, are low. There has been a flight to safety in bonds and in gold. The World GDP continues to slow, the bounce from the resolution of the US financial crisis will not boost economies for weeks to come.

Invest in financial stocks for the long term and don't worry about the Iran deal. The financial deal will be passed no matter the situation in Iran. Also, the congress must pass a CR no matter what is going on in Iran. The tension in Iran is giving further assurance that the congress will not attempt to attach a drilling moratorium on the CR. Iran is now, in effect, on the back burner as the financial deal and the adjournment of congress will probably occur by this Friday. Bush and company will have about a month before the election to complete international treaties. If they are not completed, lots of pressure will be applied. McCain is viewed by 58% of Americans as the better choice for Commander in Chief.