At a Loss For Words - 4 / 24 / 2009

Yesterday's announcement concerning Paulson, Bernanke, and Bank of America CEO Ken Lewis may have sent shock waves through a less savvy market. But the US markets took it all in stride. I will use this fact, again, as proof that traders are running the indexes now. That new investment money is still on the sidelines. And lastly as a reminder that the US Government sees Wall Street firms and the Commercial Banks that acted like them, as speculators and taxation profit centers, and not value builders.

Essentially, Paulson and Bernanke told Bank America that the American public should be kept in the dark concerning the condition of Merrill Lynch. That saving Merrill Lynch and its shareholders was more important than lying to and damaging Bank of America's shareholders. That Bank of America had enjoyed the favorable economic and regulatory conditions of the US markets for many years by the good graces of the US Government, and now the US Government was telling them it was pay back time. Oh, and if you are not happy with the US Government's position on this matter, we will remove you and your board and put another Liddy (AIG's government appointed CEO) in charge. I am truly at a loss for words. This public revelation essentially tells all CEO's that the cost of capitalism is, at any time, at the bidding of the US Governement and that the shareholders rights are nearly worthless in the Government's mind. That is a terrible precident.

Perhaps more shocking is that Paulson, a man who benefited enourmously from the government's lax regulations when working for Goldman Sachs, was able to lead the charge in the selection of survivors among AIG, Citibank, Lehman, Bear, Merrill Lynch, and now Bank of America, while maintianing and funding via government requirement, the stability of Goldman Sachs. One can only imagine the books that will be written on this era in the future.

In the past you may remember that JP Morgan bailed out the government. Well these days are long gone. And in their place seems to have arisen the greatest theft from American shareholders and investors ever perpetrated. It may not seem like it, but I really am at a loss for words on this subject.

But one thing is true. The President I voted for has proven to be a greater light weight than the most conservative media could ever have guessed at. Virtually all of Wall Street's value has been consolidated by this government's direct decisions into 2 banks, Goldman Sachs and Morgan Stanley. That, people was not through survival of the fittest, but through government selection led by former Goldman Sachs partners and consultants. This President has permitted this to happen and has yet to show that was his vision or even by his influence or approval that this consolidation occured.

So what good has come from all this? Perspective. You can rely on no one to make proper invesment decisions but yourself. And even when you make them the government may, at some point in the future determine that your equity position does not deserve the proper free market information its agency, the SEC, requires of its public companies by law. You have learned that the government has always been working with these large banks, and only during a bear market is that marriage exposed.

Wall Street professionals always knew this, they just didn't tell you. And that is why the markets shrugged off this news of forced collusion of public entities and the government at its highest levels.

I wonder, who other than Goldman Sachs will ultimately benefit from this government's efforts in the US economy? I also think we now know the conversation that was had with Warren Buffet and the US Government prior to his preferred investments in GE and Goldman Sachs.

GE closed yesterday at $12.03. Dell at $10.20 no changes needed.


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Brad van Siclen