The economic picture continues to darken and most investment asset classes continue to flounder in lockstep. To say it's been a trying time as an investor would be akin to saying you might get wet in a monsoon. These last few weeks the bulls and many of the bears have been trying to find reasons why the market should stop going down, but the technical, fundamental and sentiment indicators remain burdensome.

I'm not an economist and am not going to pretend to know just how bad things will ultimately get, or how long they'll last that way. But I do trust my instincts and have the good sense to listen to people smarter than me who deign to share their views when asked. Times are tough. Times will get tougher. And, as I said several times over the last few months, be wary of thinking bad news is priced in, or that valuation is, in and of itself, a catalyst to move markets.

We're no longer debating the issue of recession, but rather the magnitude of said recession. We have a tendency to find false comfort in prior comparison. When something has "happened before", it's easier for us to wrap our minds around the eventualities and potentialities. That's been a huge part of this market correction. For most of us, the velocity, breadth and severity of this economic downturn is unprecedented. As a result, we have no safety net with which to react.

It would be one thing if investors were the only ones wading into uncharted waters; as an industry we've proven quite adept at adjusting to the paradigm du jour. But here's the rub...this is a generational problem that permeates every rung of our society.

Let's focus our attention on an industry near and dear to me, the information technology sector. Let's say, for argument sake, this recession is going to resemble the early 70s recession in magnitude [I think we have to go much further back to any reasonable comparable]. How many publicly traded technology companies even existed 35+ years ago? Those that did, for example IBM and Hewlett Packard, were entirely different constructs back then. And they're the exceptions to the rule. Think of a technology bellwether today and realize that, with near certainty, they haven't had to deal with an economic environment like the one we're currently enduring.

• The internet didn't exist the last time things were this tough
• Online advertising models are untested in a time of global deleveraging
• The cellphone industry has never had to deal with a period when worldwide GDP was as slow as we can reasonably expect in the next 6-12 months
• Semiconductors were a high growth cottage industry in the last slowdown of any magnitude
• Will the video game cycle really survive unscathed in a consumer-driven recession?
• ...and so on and so on

How will companies react? How will their employees handle the new reality? Will executives have the appreciation for history to make the tough decisions? There's a lot of talk about the strong getting stronger, but are they prepared to take truly dramatic measures?

I don't mean to pick on the technology industry, although I think it has unique challenges because of the relative newness and embedded sense of "growth over all else" that's driven the industry for the last few decades. But this systemic inexperience I'm referencing extends far and wide. Precious few management teams have handled this kind of global picture, and fewer still have navigated it successfully, in any industry.

What's the moral of the story? Uncertainty abounds. Logically you can't have any faith in forward estimates right now, particularly those over the next 6-12 months. So my advice? Don't try. Focus on companies that you believe are survivors, those that have a history of doing right by shareholders in good times and bad. Those who are targeting secular trends that will supersede a multiyear recession if you're patient enough. Understand that valuations as most of us have known them are irrelevant now. Right now it's about surviving. Unless you have to catch the bottom, don't try. Roughly 50% of the S&P500 is trading at 10x or less trailing GAAP earnings now, so just because something is "cheap" doesn't mean it's investable. Appreciate dividends and the power of compounding. REALLY appreciate a company's ability to generate cash flow, preferably sustainable FREE CASH FLOW. And recognize that anything you buy today, probably wll be cheaper tomorrow. These are humbling times, and we are all inexperienced denizens of this brave new world.

Disclaimer: At the time of writing, neither the author nor the firms affiliated with the author maintained a position, long or short, in the publicly traded companies mentioned or any related instruments. The author and the firm reserve the right to alter their investment positions at any time in the future. The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions. 

I've been hearing a lot of people argue that "stocks are cheap" as we continue to see bourses around the world plummet. As an investor, I'm acutely aware of valuation and its role in investment selection and subsequent performance. But I'm also mindful of how valuation loses significance at times of great velocity.

Link provided by CNNMoney.com

Are stocks cheap? By some measures, they certainly appear to be; at least relative to where they've traded over the last decade. But here's the rub...the de-leveraging we're seeing and the financial crisis we're dealing with is unlike anything this world has seen in generations, much less the last ten years. The daily moves we're seeing are comparable to what we saw in the 20s and 30s folks. So whether our equity markets are cheap compared to the last ten years hardly seems relevant.

But at the end of the day, if you're a fundamental investor [as I and my partners are], you have to remember that valuation doesn't supersede fundamentals. It can be tempting to look at a stock and see that it's trading at valuations we've not seen in our careers, but that can be a painful crutch. It gets back to my assertion last week that stocks aren't as effective at "pricing in" downward estimate revisions as we would like to think.

Remember the Nasdaq Bubble...the inverse can be true, too

At the peak of the Nasdaq bubble, very few investors could make a credible argument that stocks weren't obscenely valued. Blue chips were trading at 10x-20x-30x REVENUES. Triple digit P/Es were the norm. Companies with almost no revenues were coming public and trading at 100x projected sales, or higher. The idea of valuing companies on their future cash flows was resoundingly discredited as "out of date." Sell-side analysts turned to the "relative valuation" game, i.e., "ABC Corp trades at 80x revenue and XYZ is growing faster, so it should trade AT LEAST 80x revenues or more." And buy-siders played the game because you would've been slaughtered on an absolute basis if you didn't.

There were plenty of fund managers waiting for the inevitable crash to happen at the start of this decade. And yet I can tell you that many of them went out of business waiting for that crash to happen. Stocks were expensive, insanely so. And they continued to get more expensive.

The Nasdaq Bubble didn't burst because of valuation. It was only after the fundamental problems became unmistakable that investors began a rampant and unapologetic DE-LEVERAGING of their equity investments. And stocks went from insanely expensive to, in many cases, inordinately inexpensive. How many optical networking stocks went from 80x sales to trading a below net cash? More than you and I care to remember.

So again I'll say...the inverse can be true

Stocks can also become INSANELY cheap. And they can stay that way for years IF the underlying fundamentals that drive the market remain weak. I sure hope that doesn't happen. And I've seen a lot of aggressive action by the world's governments to prevent that from happening. There's a truism that says, "Don't Fight the Fed." Well right now the stock markets are "Fighting the FedS." And we're all not going to magically wake up one day and say, "OK, that's it...stocks are TOO CHEAP and I'm buying." Nope.

Valuations aren't an impediment to a new bull market, and that's a good thing. But for stocks to turn, and sustain an upward trajectory, it's got to come from improvements [or anticipation of said improvements] in the fundamentals. And right now that's as much about watching the TED spread, the Baltic Dry Shipping Index, and what specific investments (and when) TARP will be undertake.

As my friend Howard Lindzon has been saying, this is dangerous market. Guys like Steve Cohen, Israel Englander and John Paulson aren't sitting on billions in cash right now at market lows because they're scared. They are some of the most aggressive, accomplished investors on the planet and yet see too much uncertainty to put the majority of their partners' capital to work. Take note, I certainly am.

Disclaimer: At the time of writing, neither the author nor the firms affiliated with the author maintained an position, long or short, in the publicly traded companies mentioned or any related instruments. The author and the firm reserve the right to alter their investment positions at any time in the future. The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions. 

To those who don't have to be actively involved in the stock market on a day-to-day basis, don't be. Honestly, the volatility and uncertainty in the market right now is making the most astute investors look like rank amateurs. In that kind of environment, unless you're a professional, focus on the task at hand; whatever that may be.

Now for the rest of us who have a fiduciary responsibility to be actively engaged in the market, let's talk about expectations. In an ideal world, a company's stock price would reflect the net present value of all future cash flows [adjusted for what portion of the total ownership of the company said equity represents, of course]. But in a world where companies are revalued on a tick by tick basis, a LOT of other factors can drive stock price movement in the near-, intermediate- and, yes, long-term.

As much as it pains me to look back on the bursting of the Nasdaq Bubble, the experience of being a technology investor in those years has served to steel me (somewhat) from the nastiness that's currently unfolding.

I keep hearing about how "this time it's different." In many ways, that's true:

• Valuations didn't start out at obscene, bubble levels
• The current market hasn't been littered with technology IPOs
• A much larger percentage of IT spending is maintenance related versus discretionary
• The rate of growth for overall IT spending isn't several factors faster than GDP this time out
• Technology, as a sector, isn't far and away the most crowded long trade

Acknowledging that the current environment for technology issues isn't the same as 2001 is comforting in terms of magnitude, but not necessarily in terms of direction.

As sell-side analysts slash and burn their forward estimates and lower their ratings on technology stocks, at a time when the market is already in a free fall, I've begun to hear from a lot of intelligent people that THE BAD NEWS IS PRICED IN.

Sounds great in theory, but falls short of today's reality...

• SAP AG (SAP) was down $5.97 today (13.08%) after issuing disappointing Q3 top-line results and characterizing the September shortfall as "sudden" and "unexpected"
• Double-Take Software (DBTK) was down $1.51 today (17.3%) after the company issued preliminary Q3 results this morning. This was a company that was already trading near its 52-week low and significantly below its 52-week high of $26.54
• RightNow (RNOW) fell $1.43 (12.9%) today after announcing negative CFFO due to extended payment terms and longer collection cycles. This was a company already trading far off its summer high of $17.26

These are just examples from today, to say nothing of the bloodbath we've seen in bellwether names like Research in Motion (RIMM) following an earnings report that didn't meet investor expectations.

The truth is, at some point the bad news will be "priced in" but we're not there yet (in my opinion).

Here are things I'll be looking for in the coming weeks as the earnings season unfolds:

1. Guidance meets reality -- Technology companies need to acknowledge the weakening economic climate and readjust expectations, both internally and in terms of published guidance to the investment community. The truth is, too few technology companies have lowered forward estimates yet, and as long as the velocity of earnings revisions is downward, stocks will struggle to find bottoms regardless of valuation
2. Cost rationalization -- Tech companies, even large, mature ones, have "growth" built into their DNA and often continue hiring aggressively in the face of slowing macro trends. I'm looking for evidence that the industry is slowing hiring and or making appropriate layoffs to right size their businesses
3. Putting money where their mouths are -- While semiconductor companies are capital intensive, many technology issues (software, internet, some hardware) are both cash flow positive and flush with cash on the balance sheets. With the SEC softening corporate buyback rules, and the market selling off demonstrably, there's no better arbiter of a "floor" in the industry than seeing cash-rich companies putting money where their mouths are. In a similar vein, I have a hard time accepting that stocks are bargains when company executives continue to sell their shares indiscriminately
4. Follow buy-side sentiment indicators, not sell-side -- Sell-siders aren't great market timers. And that's being kind. I don't look at a rash of downgrades in a bear market (or upgrades in a bull market) as predictive. But I do look at what my fellow buy-siders are doing in aggregate. If the HF industry is, in aggregate, overweight technology, in a declining market, the bad news isn't "priced in."
5. A stabilizing macro environment -- When the macro environment stabilizes, normalcy will return to tech spending soon enough. Areas where spending is largely non-discretionary (i.e., security, storage) should show the first signs of normalization, if history is any indication.

The market is a humbling mechanism. Yes, stocks aren't trading anywhere near the valuations they were during the Bubble. But let's not forget that many of those same companies ended up trading BELOW NET CASH at the bottom. I'm not suggesting we'll see those kinds of lows again this cycle, but understand that valuation isn't the only thing that matters. When aggregate estimates are going lower, it's VERY difficult for technology stocks to move higher. Impossible? No. But difficult? Indeed.

The key? Own great companies at great prices. Easier said than done? Perhaps; but that gets back to my original advice. To those who don't have to be actively involved in the stock market on a day-to-day basis, don't be.

Disclaimer: At the time of writing, neither the author nor the firms affiliated with the author maintained an position, long or short, in the publicly traded companies mentioned or any related instruments. The author and the firm reserve the right to alter their investment positions at any time in the future. The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions. 

You've got to hand it to him, Warren Buffett knows how to make a splash.

Last week, the world's greatest value investor stepped into the maelstrom and invested $5B in Goldman Sachs. At the time, a lot of us wondered whether Buffett's move would calm the markets -- it hasn't. Tomorrow we'll get another chance to see if the Oracle of Omaha's confidence in bellwether U.S. equities will help stem the tide of investor uncertainty.

That's because today Warren Buffett invested $3B in General Electric. The terms were similar to those he received from Goldman Sachs:

• Berkshire will invest $3B in exchange for perpetual preferred stock that pays a 10% annual dividend
• Berkshire will receive rights to purchase an additional $3B in common stock at $22.25 per share, exercisable for the next 5 years
• GE will raise an additional $12B in common stock through a spot secondary [pricing tonight]
• GE can call in the preferred stock at any time over the next three years for a 10% premium

In discussing the deal, Buffett spoke of the opportunities he's seeing in the equity markets as well as GE's stature as an American institution:

"Frankly these markets are offering opportunities that weren't available six months or a year ago," Buffett said in an interview on CNBC. "So we're putting money to work."

"GE is the symbol of American business to the world. I am confident that GE will continue to be successful in the years to come."

So should investors look at Buffett's actions enthusiastically as a sign that it's safe to get back in the water OR are his investments actually cause for concern and indicative of just how serious the credit crisis has become?

The Bull Case -- Buffett is putting money to work

Buffett has invested $8B in the last week in two respected U.S. domiciled companies. Both are on the SEC's no-short list and both have suffered difficult times and lagging stock prices. Many people have made a career out of following in Buffett's footsteps, and there is unquestionably a symbolic component to seeing him put Berkshire's capital to work at a time when so few investors are willing to commit.

Mike O'Rourke, the Chief Market Strategist for Baypoint Trading (BTIG) summed up the bullish side of Buffett's actions in his nightly newsletter:

Once again, we find the cynicism surrounding another Buffett investment stunning.  For twenty years, market participants clamored to follow Buffett into any transaction, and now that he is finally putting money to work, the common response is that companies are giving him too much. In a capital constrained world, if you can get Buffett’s capital, you are well ahead of the competition.

The Bear Case -- Buffett is naming his terms, and they're not cheap

10% perpetual preferred plus warrants = hardly the same as going out and buying common shares in the open market. Buffett is no altruist, he and his investors expect him to act aggressively when opportunity arises. He's getting extremely attractive terms because GE and Goldman Sachs feel those terms are warranted; and there's the rub. GE is an American institution and carries a AAA credit rating. The fact a AAA-rated firm of GE's caliber would feel compelled to offer a senior perpetual preferred to any investor, even Warren Buffett, is a testament to just how tight liquidity remains throughout the system. To take a page out of my friend Roger's book...companies are paying a premium for option liquidity.

So is Buffett signaling a market bottom? Impossible to say. Buffett doesn't need the equity markets to rally for his investments to pay off. He just needs GE and Goldman Sachs to stay solvent and pay him 10% dividends year in, year out. Furthermore, Buffett is telling anyone who listens just how tenuous a situation the capital markets are in and the necessity of a bail out and then a lot of hard, smart decisions to follow.

One last point...To be a truly great value investor you have to zig while others zag. You have to be willing to put capital to work in an area where most won't. That's why great value investors pounce during periods of extreme sentiment. Buffett has the benefit of hindsight, great instincts and, most importantly, an ability to be patient in a market that, by definition, favors impatience. Stock prices are quoted in the blink of an eye, returns are followed in real time, funds are put to work and redeemed based on what happens over the course of days, weeks and months. To make money the Buffett way, you have to be willing to forgo all of that and treat equity stakes as though they were private investments with long-term horizons. That's MUCH easier said than done. Most public equity investors, particularly those running hedge fund money, are compensated [and rebuked] based on what they do in shorter time intervals. Buffett doesn't need to worry about that; if Berkshire Hathaway's stock were to meander for years, it wouldn't change his functional wealth, his buying power, or his reputation.

Disclaimer: At the time of writing, neither the author nor the firms affiliated with the author maintained an position, long or short, in the publicly traded companies mentioned or any related instruments. The author and the firm reserve the right to alter their investment positions at any time in the future. The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

If I hear "may we live in interesting times" from one more person...

For investors involved with Google [GOOG], today was indeed memorable. Like many tech bellwethers, Google was slammed in Monday's carnage. Today, in the uber relief rally, Google shares were humming along and regaining much of the losses from Monday. That is, until the closing bell.

Volatility, thy name is Google
One moment Google appears to be trading comfortably above $400 per share, and then, in the final minutes of the day we saw prints as low as $212.63 and as high $483.63; with the closing price as $341.

HUH? Excuse me?
Within seconds of the closing print, my head trader called my office to explain what transpired. He had warned us the day before that with the quarter end, the liquidity crisis and the historic volatility we should expect quite a few odd trades particularly on the opens and closes. While I recall the warning, I certainly didn't expect a 16% swing in a matter of minutes!

Why the closing price matters
Within moments of the closing price, it was clear something was amiss. In after hours trading, Google was trading comfortably above $400 [at $405 or so when I first took a gander]. So that might lead you to ask, so what was the big deal?

Well, as money managers know full well, the closing price matters, PARTICULARLY the closing price at quarter end. Most funds report results in some fashion on a monthly basis, and quarterly filings are required of all registered funds. This was both a month end AND the end of Q3. And this was GOOG, a stock that just about anyone involved in technology investing has at least some exposure to.

Had funds been forced to accept the closing price of $341 today, a number of issues would've been at play:

• Management fees -- Funds that charge management fees [i.e., almost all of them] generally take their fees on the 1st day of every quarter. So if you had a large position in Google, it was possible that the $341 print could've cost your fund a substantial amount of cash flow. For example, let's say you're running a $1B hedge fund that charges a 2% annual management fee. You are long 125,000 shares [roughly a 5% long position]. The difference between the legitimate closing price ($400.52) and the reported closing price ($341) or roughly $60 per share equates to a difference in ending equity of $7.5mm. The quarterly allocation of a 2% management fee (i.e., 0.5%) would be $37,500. Might not seem like much, but $37,500 in lost cash flow is meaningful for any business.
• Reported returns -- Month- and quarter-end returns would've been skewed. In the same example (125,000 share long of GOOG), this would've cost a fund as much as 75 basis points of reported returns. That's a big number, particularly for a volatile month where the majority of funds likely reported losses anyway.
• Skewed basis for capital inflows -- Depending on whether a fund was due for capital inflows at the start of the month, this would serve to unfairly skew the cost bases for existing clients if you initiated a buying program for the new capital at the October 1st stock price.
• Skewed basis for redemptions -- The inverse of the above. Investors taking money out as of September 1st would've had their returns understated. 

Luckily, all of this turned out to be in error. Our trader sent me the following notification after this whole debacle unfolded:

Pursuant to Rule 11890(b) NASDAQ, on its own motion, has determined to cancel all trades in security Google Inc Cl - A "GOOG" at or above $425.29 and at or below $400.52 that were executed in NASDAQ between 15:57:00 and 16:02:00 ET. In addition, NASDAQ will be adjusting the NASDAQ Official Closing Cross (NOCP) and all trades executed in the cross to $400.52. This decision cannot be appealed. MarketWatch has coordinated this decision to break trades with other UTP Exchanges. NASDAQ will be canceling trades on the participant’s behalf.

Interesting times indeed.

Disclaimer: At the time of writing, the author and/or the firms affiliated with the author maintained a long equity position in Google [GOOG]. The author and the firm reserve the right to alter their investment positions at any time in the future. The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Should they, or shouldn't they?

As news broke last night that the potential $700B bail out was falling apart thanks, in part, to John McCain's involvement in urging for an alternative proposal, it seemed we were very close to postponing, if not outright canceling, the first of the scheduled Presidential Debates.

McCain had already signaled his intention of skipping the debate earlier in the week:

"I am calling on the President to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself," Mr. McCain said in New York on Wednesday afternoon. "It is time for both parties to come together to solve this problem."

McCain's critics immediately cried foul, implying that he was using the dire financial crisis to his political advantage. Obama's critics were equally offended by his retort that the debate should go on, complaining that he was using McCain's bipartisan overture against him.

The Argument Against Debating Tonight

I was having a conversation this morning with one of my partners, Monty, who is - by far - one of the sharpest and most reasoned minds I have the pleasure of associating with. Were it not for him, we wouldn't have been half as defensively positioned as we've been in the face of this crisis. And, for the most part, we see eye to eye on life's big issues. I say all that because he and I appear far apart in our view of the debate.

His view is that neither Presidential hopeful should take the stage tonight. He reasons that regardless of whether McCain's overtures were politically motivated, it was the right decision because the future leader of the free world [whether it be Obama or McCain] needs to have a direct hand in shaping the solution to our current crisis. I can't disagree with his logic, McCain and Obama are acting U.S. Senators and one of them will be the POTUS. To not have input on what's transpiring now would be a disgrace.

Another good friend of mine [who wants to remain anonymous] reminded me that "elections aren't won or lost on debates, they're just dog and pony shows to help the media get some ratings points." While I don't entirely agree with his jaded premise, I do understand his point that debates, in and of themselves, aren't always the most important variables in the election equation.

Why I Disagree and Think We MUST Have a Debate Tonight

Despite the very rational arguments against having a televised debate tonight, I'm strongly in favor of the debate forging ahead as scheduled.

Reasons for forging ahead:

1. It's the largest audience the candidates will have prior to the election -- History shows that the first debate is always the most watched. Furthermore, 70-80 million Americans will be watching tonight's events which is, inarguably, the widest reach either candidate will have to stake his claim to the highest office in the land
2. Debates HAVE played an enormous role in close elections -- The polling numbers indicate an incredibly close race. Many voters remain undecided. History has shown that televised debates CAN be major factors in tight races. Let's not forget that Ronald Reagan and Jimmy Carter were neck and neck in the polls until the debates.
3. The American people deserve a place at the table -- Putting off or canceling a debate at a time of crisis would send the wrong message to an American voting populace that feels underrepresented already. What kind of message would it send if our candidates held off addressing the American people in order to solve a financial crisis that most voters view as a "Wall Street" problem? Misguided or not, a LOT of Americans feel that way, and we can't ignore the will of the people.
4. Oration and debate are critical skills for a competent world leader [or at least SHOULD be] -- Call me an idealist, but I still believe that the POTUS should be able to convey a strength of character and ideals on the largest of stages. He should be able to stand before the world and evoke a sense of calm, a sense of trust and, most importantly, a sense that he's a leader of men. I would never hire someone that couldn't articulate their views clearly and concisely, why should it be okay for the most powerful elected official in our country to lack those skills? As I type this, I'm staring at copy of Abraham Lincoln's Speeches and Writings sitting on my bookshelf, is it unreasonable to think we could again have a leader as eloquent?
5. We may actually see our candidates go off script, for once -- Tonight's debate is supposed to focus on foreign policy and national security. That said,  I would be shocked if Jim Lehrer [tonight's moderator] doesn't find a way to make our financial problems a central issue. Debate preparation is a science unto itself these days, I realize. But if there's going to be a moment when Obama and McCain have to think on their feet and speak off the cuff, it's tonight. We're in the midst of a historic financial crisis and neither man has all the answers [because there are no answers, yet]. Let's see how they handle themselves at a time when there is one central issue that most voters care about, and no stump speech or party line with which to stand behind.
6. Postponing under the guise of dealing with the financial crisis is disingenuous [or would at least be perceived that way] -- The idea that debating would take either Senator out of the ongoing financial bail out discussions rings hollow, in my view. It would be one thing if both Obama and McCain were busy handling their Senatorial duties in lieu of other campaign obligations, but how many days (and votes) have they missed on the campaign trail? It's reasonable for them to hit pancake breakfasts, church socials, and rallies in key electoral blocks day in, day out, but not reasonable to address the key issues on the grand stage? Non sequitur.
7. Debating doesn't preclude the candidates from being involved in the process -- These men are used to appearing in three or four states in a single day and how many countless appearances? How many people on staff do they have? Is there a chance they're not connected 20 different ways to what's happening back in Washington? Realistically, they could bury their heads back into this bail out discussion the second they're off the podium, while flying in their planes back to D.C. and as they're being chauffeured back to the Congressional offices.

I realize I may be coming across as an idealist [when I genuinely pride myself on being a realist]. But I've always felt that the office of President of the United States should be held by someone capable of greatness. I find it impossible to reconcile the notion that the leader of the United States can't be both a person of character and a polished orator. Why can't we have it all? Has it gotten to that point where it's no longer reasonable to expect our POTUS to be more intelligent, more articulate, more inspiring than most? I certainly hope not. Could tonight's debates end up an unmemorable blip on the long election trail? Perhaps. But given the uncertainty surrounding our economy, the myriad questions [many without answers] facing us in the days and weeks ahead, wouldn't it be fantastic to be blown away tonight by one of these men? To be shown that, in fact, one of them really is capable of greatness? I'll be watching, and I'll continue to hope until the last of those 90 minutes.

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

The search for someone to blame is always successful -- Robert Half

Blame Game for Financial Crisis

Created using http://wordle.net/. Images of Wordles are licensed .

Blame is EASY. Especially in a situation as grave as our nation is facing right now. I say this because I'm overwhelmed by the pervasiveness of blame in the process. Congressional hearings where the only bipartisan action is finding someone, other than Congress, to blame for our financial crisis. Investment banks crying afoul of short-sellers. Homeowners blaming predatory lenders for making it too easy to overextend themselves. People decrying future tax burdens because their neighbors took out huge mortgages with low teaser rates. Debt holders blaming the ratings agencies for rating things AAA when they were Toxic FFF. And so on and so on...

BUT IS THERE A POINT? Is BLAME productive?

When I was in college, I was involved in a car accident. I was in the back seat of my friend's beaten down clunker; and we were driving on the shoulder with our hazards on trying to get off the turnpike and find a hotel for the night since there were no mechanics open at that hour. It was a cloudy, rainy night and unbeknownst to us there was an 18-wheeler coming up behind us. The driver of that 18-wheeler was dozing off. Long story short, the 18-wheeler slammed into the back of the car and I woke up in an ambulance, unsure of what happened. I learned during that process the concept of COMPARATIVE NEGLIGENCE. Essentially the courts try to determine who to blame, and assign a percentage of blame to each participant. I was apparently 10% to blame; for failing to have a seatbelt on [despite it being legal since I was in the back seat]. The truck driver was 60% to blame; apparently falling asleep at the wheel and slamming into another vehicle works that way. And my buddy, the driver, picked up the rest of the blame for being on the road in a broken down car rather than stopping and awaiting emergency service. The courts used the percentages to determine the amount of damages awarded to the injured parties.

While comparative negligence may work for disability tort litigation, it has absolutely no place in stemming the tide of this financial crisis. If we're really on the precipice, as the Treasury Secretary, Fed Chairman and even the Oracle of Omaha believe, isn't assigning blame right now a suboptimal way of spending our time?

Howard Lindzon said, "I am not a fan of witchhunts, but they generally get shit done." His point is well taken, even if I wish it weren't.

Sometimes there are legitimate reasons for assigning blame, for figuring out WHOSE FAULT IT IS. But there will be time for that later. Our country is facing the most severe financial crisis since the Great Depression and there are no easy answers. Paulson and Bernanke haven't done a credible job of articulating the losers in this crisis. Yes, Wall Street stands to lose jobs and a lot of wealth. But Main Street stands to lose much more. The inability for small businesses to stock shelves and make payroll because lines of credit are drying up. The inability to refinance mortgages. Students unable to pay for tuition because student loan programs have evaporated. Retirees unable to pay their bills because their portfolios are pressured. We are already in recession territory, how many of us truly understand what it would mean to be in a Depression? Are we really prepared for double digit unemployment? Unfunded pensions? Municipal bankruptcies? Further devaluation of our currency? Reflation?

If not, we all need to get past our personal biases, our anger, and our desire for a pound of flesh. Can we do it? Or will we worry about making sure those most culpable aren't disproportionately benefited by a bail out effort? You decide.

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions.