"Received in my email"

A story that didn't get much ink yesterday (I read it on Bloomberg.com) is that Oppenheimer is looking to relocate its domicile to America from Canada. It was revealed in a filing that management is asking for shareholder approval to relocate to Delaware from Toronto so the company can get a crack at some of that TARP money. The reason that the company needs the money is because of its participation in the auction-rate securities market, which was turned upside down last year after systemic practices that included not thoroughly explaining risks. Ultimately, big banks were forced to return billions of dollars to investors. The company's retail clients hold $930.0 million in these debt instruments and management says repurchasing them would have a material adverse effect on the business. There is no monopoly on dumb actions taken in the financial community over the last several years but this should be an outrage. The notion that taxpayers are going to put up money to make sure a Canadian company will not go out of business, despite what may have been unsavory business practices, is shocking.

Mixed Signals

We were told over and over again yesterday during testimony from Geithner, Bernanke, and later President Obama that the system has to be retooled because it was broken. Yet, this is a case where actions mitigate or belie words with respect to the current cure and future parameters.

Item:
* Goal is to contain risk-taking by limiting compensation.

Reality:
* We are encouraging risk-taking and abetting it with huge leverage to a handful of players that stand to make obscene compensation should the public/private game plan works.

Item:
* There needs to be discipline in financial markets.

Reality:
* The government refuses to use bankruptcy for banks and automakers despite the fact that such an outcome would be the clearest way to send a message that there is no safety net for excessive risk-taking.
While the solution seems to be to spend as much money as possible, clearly the root of how we got into this mess in the first place, America will need to raise money from all over the world. Although China has been buying treasuries, despite hints to the contrary, there is no mistaking that next week's G20 meeting will be a coming out party of sorts. After calling for a new global currency to be administered by the International Monetary Fund, China is stepping up its plan to have a greater say in world affairs as perhaps the de facto representative off all emerging growth countries. As if having 1.3 billion people isn't enough, essentially China wants to be the voice of more than half the population of the planet. I see China doing economically what Russia couldn't do militarily or philosophically, which is to be a real rival to America for global influence. Europe is just sitting there falling deeper and deeper into an untenable position that will lead to civil strife, making an economic crisis seem like a walk in the park.

The good news is that Europe may have no choice but to fold into America's arms, although some Europeans thought it would be the other way around when the euro began to take off. Sure, we are moving toward a socialist system that goes beyond basic services (i.e. police, fire, and the post office) to control over industry, but we better be ready to reach into our capitalistic DNA because this is going to be a fight as real as stomping out communism. Yesterday, Chinese and China-related stocks were up huge including Bidu.com (taking market share) and dry bulk shippers like Dry Ships (DRYS). What a strange world where we are battling a former communist nation that is using money and opportunity as a carrot domestically and abroad while we are saying there should be limits (in the guise of regulation or risk management) on success. The "Cold War" was all about cloak and dagger stuff with staged coups and behind the scenes manipulation. This new fight is in your face with manipulation on a grand stage.

"You know, if I hadn't been very rich, I might have been a really great man"- Charles Foster Kane

It's time to stop the self-loathing and understand the real threat(s) to our way of life and the pride that comes with living in the most successful country on the planet. I'm not sure how that's going to be accomplished in this climate, however. Ordinary Americans, and even most people working on Wall Street, are being told to buy into a program that could see a small group of money managers make a ton of money so the masses don't lose much money. I know there are financial theories that suggest the price of assets influences the intrinsic value of an asset but I don't think the mortgage of someone just laid off gets any better or less risky because it changes hands. But it is a plan, and these days that's something to cheer about. Speaking of plans, the Fed is wasting little time getting into the market to purchase $300.0 billion in agency debt. The market was edging higher when this news was released.

Oh yeah, I must say that Congresswoman Maxine Waters was barking up the right tree yesterday when she tried to get Geithner and Bernanke to fess up to the depth of influence that Goldman Sachs (GS) has on the administration (all administrations). If they are one of the lucky five that get to buy securities with the governments backing there will be howls to the moon. I thought that it was a crock when one of the guys testifying said there was a vetting process as if there are many entities with $100.0 billion in assets and the ability to raise large chucks of money in this environment. Perhaps Goldman has too much influence, but it is the last man standing. What makes this whole thing peculiar is the secrecy and evasiveness of those in charge when the topic comes up. Why?

Corporate America Fires Back

Congress is considering reclassifying FedEx (FDX) under the National Labor Relations Act rather than the National Railway Labor Act, a move that would make it much easier to unionize the company's workers. FedEx has said it would delay the purchase of 30 new Boeing (BA) 777 cargo planes if this move happens. This is a serious move on their part and suggests that corporate America is going to fight back. Without a doubt in this climate such a delay would mean drastic losses in job opportunities. The planes cost $225.0 million each so this is a big deal. I know people that work at FedEx and the company could never be confused with coal mines in Appalachia circa 1908, nor could it be confused with the biggest target of unions...Wal-Mart (WMT).

Corporate America has the second highest tax rates in the world and is facing more regulations along with other anti-business measures coming down the pike. I wonder how congress is going to react.

This is going to be a real donnybrook, the first of many.

President Obama Press Conference

One thing is clearer now than at anytime since the year began...a large part of the recovery is going to have to be on faith. To a certain extent Americans are being asked to roll the dice in a way businesses are going to be unable to do in the future. It goes beyond blind faith because we know that at the end of the day the deficit is going to be so massive as to boggle the mind and rewrite the history books. The problem as I see it is the insistence on ramming a social agenda through under the cover of financial Armageddon. There is no doubt that we must invest in education, and who doesn't want to get off foreign oil and see improvements elsewhere. But, what is being proposed goes beyond economics and hits at an ideology that is at odds with capitalism. Moreover, it is tough to try at such a fragile time. Although the question and answer period still had vestiges of the media honeymoon there were better questions, though nowhere near as tough as the dark clouds hanging overhead.

The one thing that can't be talked away or dismissed is the massive deficit, which will linger on for years and will become an untenable monster. The interest payments alone are frightening.

The president said that there would be no quick fixes and no silver bullets, and hinted to the possibility some actions taken thus far will not work and more action is sure to come. Still, the Street is simply happy for a plan and is willing to bet something is better than nothing. I say take advantage of the situation but don't drink the Kool-Aid. Just as when the market was falling completely apart I asked everyone to stay vigilant and pick spots I think that we should ride the wave but be ready for it to fade.

Economic Data

Durable Goods Orders

Yesterday we noted a test of the rally would come with today's durable goods orders report, which was widely expected to be dour. Well, a test of the rally in the face of weak economic data will have to wait (see jobs report) as the February durable goods orders report was well ahead of market expectations. Headline durable goods advanced 3.4% (consensus: -2.5%), ex. transportation rose 3.9% (consensus: -2.0%), and ex. defense improved 1.7%. While the January numbers were revised to show greater than previously conveyed weakness, it's hard to dismiss the February data. If March durable goods hold steady month to month we could certainly be looking at a situation of budding confidence in the economic prospects by corporations for 2010.