EARLY THOUGHTS

The Leader was at the U.N. today talking about God knows what but it seemed to have to do with Global Warming. Seems as though we are going to be the world leader in staying the path of the warming planet. Its always good to be the leader of something. It appears according to the New York Times today that the world hasn't gotten any warmer for the past eight years so maybe we are already winning. Of course the Times goes on to explain hat scientists believe that changes in the world's oceans have caused this "temporary" cooling. Although last year the Times told us that the world was warming ever year. Then again the Times...oh hell, I'm confused.

Anyway, did you think about the issue I was wondering about yesterday? I was also wondering about how much those wonderful folks who bought all those CDOs rated Triple-A by those wonderful folks at Moody's, Fitch and S & P got paid as well. You know, these creations were not purchased by little white haired old ladies. They were purchased by funds run by highly paid guys in which little white haired old ladies invested. And I betcha that these guys (and gals...let's be fair) got paid based on the yield provided to the funds through the investments they made. Now what we have to determine is whether these guys and gals got their arms twisted by the buy side people who were creating this stuff irrespective of demand or did they actually create the demand that got the stuff created? And if they were investing for little white haired old ladies or on behalf of YOUR 401K, shouldn't their due diligence have been of a higher standard--like was it too much to ask of them if they had a clue as to what they were buying or was blind reliance on the rating agencies who were mandated by Congress to perform the role not the best idea they ever had or should they have thought about the fact that Fanny and Freddie were geared up a 100 times? Or were they getting paid cash bonuses for investing in instruments whose performance would not be known for years? And if all of this is true why aren't they getting hammered like the banks? If anybody has a clue, call me. One thing you will discover is that their activities, on paper at least, were more closely regulated than those of the banking sector. Can anybody say Bernie Madoff? Regulated? That implies politicians might be involved. Anyway, as the guy on the street corner says, "Check it out."

As you can see, I'm still waiting for the results from Pittsburgh. So far it looks as though The Leader is going to take another shot at world leading despite the fact that he seems to be having a bit of a problem leading at home. I fear that he may well be more successful at financial regulation than in anything else that really counts which means that at the end of the day we could well wind up with a reserve currency that isn't worth very much and banks that don't make very much money. That is if he stops playing Blind Man's Bluff with poor old David Patterson. If he doesn't do that, aint nuthin' gonna happen. Who knows, maybe a Ward Healer from the South Side is what the World needs. We will soon find out

JUST WONDERING

This is going to be quite short. I decided that what with all that was going on this week it would be a bit silly to jump the gun and comment on things that might well have changed my comments...or to put it another way I am determined not to make a fool of myself. Or a bigger fool as the case may be.

Anyway, there is no doubt that the banks are under the gun regulatory-wise and the world is probably going to change a bit. No one wants a repeat of the past 12 months but coming up with the proper formula is the tricky part. Also putting a fence around the likes of Chris Dodd who is clearly a nincompoop at best and a crook at worst is going to be very important. Dodd is now proposing a merger of the four major oversight bodies in to one super oversight agency, now doubt to make it easier for Congress to exercise oversight over that new monstrosity ignoring, among other things, the fact that under a change of government which will almost surely occur, the U.K., our traditional partner and home to the second largest financial market in the world will move in precisely the opposite direction. Caution: Genius at work. Just a random thought.

Now have you ever thought about which came first the chicken or the egg? We all have but did you know that in the finance world there is a question almost as old and just as perplexing: what comes first the product or the market? Or, as bankers like to phrase it, the buy side or the sell side?

We have been spending great deal of time wacking bankers upside the head and with good reason but do half the Great Unwashed out there know which side of this conundrum they are wacking? Betcha they don't. Betcha they don't realize it's the buy side. Any bets? No? Well you see without the people to whom one can sell this ugly stuff that was created, there would have been no problem. Therefore, the question that really should be asked at some point is who created the market?

When I was a young man well back in the last century I was told that before we could (or should) create (buy) product we should have a distribution system into which to sell it. I always wondered what one sold if one had no product but that is the crux of the question, isn't it. Now there is no question that there was some God-awful crap created over the past few years but it was sold to someone who bought it. Now was the demand created by the creators or was it demanded by the buyers? And if the latter, does that throw a whole new light on the issue? And if does, should we also attempt to limit the creation of demand? Just wondering...more tomorrow as we await the great events of the week.