Back in the Saddle

I made it home to Massachusetts ... flying sure sucks, but I guess it's better than driving 13 hours as one ages. My plane was late, as is normal nowadays. But the car service was on the ball and delivered me to my hidden, snow-covered bunker with no problems.

The forest is beautiful here with the trees covered with frozen snow and ice - very picturesque.

Hello recession mongers ... my plane from Columbus to Boston was full and loaded with business people working on laptops and blackberries. A big guy in a high school sweatshirt listening to Judy Garland on his iPhone was quite unique; very few "leisure" travelers.

No recession without Fed betrayal.

The Merrill losses will be interesting. Why is Merrill a survivor ? Should it not be sold to JPMorgan and the trading operation zeroed. The brokerage, investment and private bank is quite valuable, but that's all.

Actually, part of my long term thesis on the big banks is that "creative destruction" will destroy much of the hedge fund industry, which is really a scam on the wealthy anyway. All those "investment banks" making money on "prime brokers" are just trading frauds. They created fake securities [aka most "derivatives" ] and traded with each other and ran up the values and made commissions and booked gains, etc., but it was all just paper. Few "real" securities issued by a real company were behind them. Derivatives were created to add to leverage to skirt the margin rules.

So now Merrill Lynch pays the price. And at least Bank of America is selling its "prime" brokerage operations.

My point is that on a reversion to "reality-based" financing, the big banks will hold all the cards: sources of real money to make real loans. Hedge fund "fake banks" go to the dumpster. Small banks got their noses bloodied and will just revert to buying loan participations from the big boys like before. GS, LEH, etc. revert to a hedge fund and pure investment banks. So the big banks will be able to control the markets, increase spreads on loans and fees and mint money for years. Obviously the infatuation/bubble in securitizing everything is over.

Alas, I was early and some big banks like C were really stupid, too. But longer term, I think this will really pay off.

I am noodling over many adds at these low prices, but will likely wait until the Fed meeting of late January. Ms. Market has been betrayed by the Fed twice already. No more, please.