Who is Driving this Bus? 3 / 20 / 2009

Readers, we are desperate for leaders. I like you have been searching for answers in the financial media. And I have been heartened by the fact that CNBC, Bloomberg, Fox Business and the Wall Street Journal have been doing their best to put long term performing, great Wall Street minds on their programs and in their pages. Unfortunately, not one of these greatest minds has any interest in taking a stand or even making more than a cursory prediction as to the economy. Terms like "very unusual period", "historic" and "unprecedented" are typical in any of these interviews. Not one is willing to risk their reputation with the investment world by making a solid prediction.

This is understandable in a way. Every day seems to bring swift and massive Federal and Congressional actions. And every day the trading psyche (and not the investment psyche) that is nearly 100% of capital markets action these days reacts to the US Government moves. I think it is safe to say that this Government has yet to recognize that it is still chasing a capital market's sentiment led by the same trading psyche that in large part is responsible for the crazed buying frenzy that bid the Dow Jones to record highs in October 2007, and extreme lows just 16 months later, wiping out value that had been building really since October 2002. Its the same trading psyche that took oil from near $150.00 per barrel in July 2008 to $38.00 per barrel 8 months later.

These are but a small fraction of illogical valuation run ups and run downs that say one thing to me. Traders and momentum have taken over the Capital markets. Where are the value investors? Where are the buy and hold investors? They don't exist. And without fundamental investors, that buy based upon historic and single digit deviation projection assumptions traders will continue to run the markets and ultimately direct this Government's intervention plans.

So what are we to do here? First the government has got to stop making historic decisions without real public discussion and description. We need more than feel good "we are determined, we will rise above this" speeches from Bernanke and the President. What we need is detailed rational that 90 percent of non-financial professionals will not understand. But that 90 percent of financial professionals will understand. Financial pros need to know the details, the good and the bad, so that their decisions can be based on an information foundation that looks planned, looks logical, and does not look reactive. Reactive in the financial markets means trouble people. This Government is reactive.

We are expecting to hear from Bernanke later today. I'll write the conclusion to this daily piece after he speaks.

Until then, try to

Build Value Every Day

Brad van Siclen