What now?

Uncle Sam is being especially generous. He has tried thrice to throw money at the problem(Bear Stearns, Fannie Mae/Freddie Mac, AIG) and failed. Now he is going to buy any and everything just about. Chairman Cox of the SEC has suspended shortselling in stocks. Of course, the stock market is eating it up. The question you must ask yourself is, "is it over?"

I don't think it is, but I am often wrong. I venture to guess that you are often wrong as well. So what do you do when your investment outlook is ambivalent? Put on some hedges. Raise some cash. I think that gold is great place to be right now. Or take a look at parking your cash in a more stable currency like the Swiss Franc. There are ETFs that allow you do both of these.

In yesterday's Washington Post, columnist Steve Pearlstein wrote that finally the U.S. was being forced by its foreign creditors to live within its means. Today's actions by the government would suggest otherwise. While, I am not as hawkish as Ann Woolner on this issue, I do want to see some bodies strung up. If you're not going to give me any money personally, can't I at least get a fall guy to tar and feather?

Can the Fed prevent bubbles?

This is the hope of Federal Reserve Chairman Benjamin Bernanke. He has hired some old chums of his from Princeton to study the matter. Bubbles are inevitable and like the Bible says of the poor, will always be with us.

If I had to guess as to why a supposedly free-market economist would have an interest in acquiring such powers I would venture two guesses. One, Bernanke is a student of The Great Depression. This is the basis of his fervent anti-deflation bias, and the reason for his famous helicopter speech from 2002. For Bernanke, deflation is the anti-Christ. The second reason for this thinly-veiled power grab is that no matter how much economists believe in free markets, they are also humans who enjoy power and prestige. I have never known a government official to dislike power or influence(George Washington is the lone example I can think of).

Bernanke has not been alone in pursuing more power for The Fed. He has had helps from the highest office in the land. At the end of March, President Bush outlined a plan that would significantly overhaul the financial regulatory apparatus of the country, "the Fed would sit at the top with expanded responsibilities as the 'market stability regulator.' But the Fed would lose its current powers over bank holding companies."

Such a broad description as "market stability regulator" reminds me of the old Roman title of dictator. We shall see whether or not Bernanke is Caesar or Cincinnatus.

Still no love for Bernanke from the stock market

Major League Baseball got hit with a bat today. The Mitchell Report came out this afternoon and some big names(Roger Clemens, Andy Pettite, Miguel Tejada)were outed as steroid users.

Wall Street is still reeling from not getting its way. Peter Coy wrote a piece on BusinessWeek.com explaining the deficiency of the Fed's latest move.

In fact, the only good news that has anything to do with America is the last few days is the death of Ike Turner.


European stock markets were down sharply. Apparently, no one is impressed by this multinational bailout.

The Nikkei was off 2.5%; It appears that subprime may reach all the way to the land of the rising sun.

So where can an investor find good news? Russia of all places. Putin is moving towards more economic liberalization.