http://finance.yahoo.com/expert/article/stockblogs/110768
Mick Weinstein The Week's Best Stock Blogs Posted on Friday, September 26, 2008, 12:00AM Treasury Secretary Paulson, Fed Chairman Bernanke and President Bush were doing everything in their power this week for Congress to approve their bailout plan. "If money isn't loosened up, this sucker could go down," Bush lamented last night. Yet despite Paulson getting down on his knee (literally) before Speaker Pelosi in the White House's Roosevelt Room, as of this morning there's no deal on a package that, in any case, leaves many market participants uncomfortable about the outsized role of government in business. In times of turmoil, if you want straightforward, informative commentary unencumbered by journalistic conventions, turn to smart bloggers: Bond market veteran John Jansen: "We are flying seat of the pants, and at the moment it appears that the pilot has had a heart attack and is slumped over the control panel... I am fearful for the markets [Friday] as the already much stressed markets confront this latest blow to confidence." Paul Kedrosky: "Congress is playing political brinkmanship with the biggest financial decision of our generation. We just had the largest bank failure in U.S. history. Credit spreads have widened to the point of gibbering meaninglessness. And some people are still nattering about what might be the perfect variant of the Paulson bailout plan. Listen. There is no perfect... Some people don't care. A few just haven't thought it through, but others are so wrapped in their anti-Wall Street vendettas, their ideological purity and their Calvinist moralizing that they would rather see everything come down around their ears... than worry that it's their economy too." David Gaffen at WSJ.com asks "can it be any kind of good news that Wall Street is watching Washington for signals in order to get this monkey off its back? The mantra among denizens of the Street, was, has, and will remain that "gridlock is good" for the markets, because it means lawmakers aren't in the way to muck up anything that could potentially mess with the investment community. Now, of course, Wall Street's future depends on Washington, which shows what kind of mess the market has gotten into." Investment banker Daniel Alpert poses five questions on the plan that he believes the Treasury should clarify right now. In lieu of that, "Treasury is asking us to step into a distorted world that makes little sense, based on trust and fear." Steve Waldman calls for greater transparency on the deal: "I cannot believe that the government may trade nearly a trillion dollars of assets on my behalf, and I may never learn exactly what it did. I would never invest in a "rocket science" hedge fund whose manager refused to disclose what he was up to. It looks like I may end up paying taxes to one." Wall Street veteran Roger Ehrenberg calls on Washington to focus on the "average, hard-working citizen's ability to live their life without economic fear not of their own doing": "Emotions are running high and, I'm afraid, many people are losing sight of the main point: frozen credit markets inhibit small and large businesses from borrowing money, people of all economic strata from buying apartments and houses, and those in financial distress owing to inappropriate mortgages from refinancing... My vision is not a transfer payment to Wall Street, but a vehicle for re-energizing and re-invigorating Main Street." Whatever the final form of the bailout and however it's implemented, the Epicurean Dealmaker believes it's critical "to maintain a clear distinction between saving the American (and global) financial system from catastrophic lockup or breakdown - which should be the point of the whole exercise - and pulling any one (or more) particular financial institution's bacon out of the fire, which should not." Investment analyst David Merkel urges Congress not to rush the bailout plan: "Anytime someone rushes you to a decision, watch your wallet. The crisis is not as severe as many would say, and there are other ways of handling the situation. Stopgap measures will hold us until after the new Congress is in place; there is no reason to rush a bailout." Is the plan anti-capitalist? Accrued Interest acknowledges that "to be sure, this kind of massive government intervention is the last thing any real capitalist wants to see.... But is what we have now any better? So now we're faced with two non-capitalist paths. On one hand, the current situation. On the other hand, a government bailout. The bailout will create some semblance of confidence in financial institutions and their balance sheets... as much as we all hate the idea of a government bailout, we really need to consider what kind of capitalism we think we're defending... in the short-term, we have to stem the relentless waves of fear. Before it's too late." Has the media neglected to adequately critique the plan? Yves Smith from NakedCapitalism was taken aback by some of the New York Times' coverage, which she viewed as "part of a disturbing pattern in the mainstream media as far as the plan is concerned... the criticism of the plan among economists has been widespread, verging on unanimity... Yet the press has treated the plan with vastly more deference than it deserves... things are going to get a lot worse before they get any better." Bush's Call to Action On Tuesday night, the President emphatically declared the $700 billion bailout package as the ticket to calm the markets and restore confidence in the financial system. Felix Salmon thought it was one of the best speeches of Bush's presidency. "He wasn't panicked, and he wasn't angry, and he wasn't telling us that we really had to Act Now Or Else. He was calm, and surprisingly coherent, and he took first-person responsibility for the bailout, and he explained the urgency without sounding like he was reacting in a knee-jerk manner...with the President breathing on [Paulson's] shoulder impressing on him the need to buy low, the government might not, in the end, lose as much money as I feared on this venture." Greg Newton thinks Salmon has been "drinking the Koolaid" and has an entirely different take on the president's talk, parsing its "true meaning" line by line. It may have been credible, but it was still an overdue and somewhat surreal affair, says Kedrosky, "with the Administration playing catch up on something monstrous that clearly has caught it almost entirely by surprise. Granted, it shouldn't have been a surprise, because this complex plot has been playing out for some time, but welcome to the movie, boy and girls. We're all hoping for a twist ending." The Oracle of Omaha Enters the Fray Warren Buffett swept in to play market superhero once again this week, publicly supporting the Treasury's bailout plan while investing $5 billion in Goldman Sachs on far better terms than the government has arranged in its dealings with the troubled big financials. What are we to make of this discrepancy? "It's a classic Buffett deal," says Jeff Matthews "...he's buying into a great company at a distressed price, with unbelievably good terms. And with this $5 billion-plus investment in Goldman Sachs, he is speaking loudly and-we think-quite clearly. What we think he's saying is that the $700 billion bailout plan being pushed down the country's throat by Hank Paulson and Ben Bernanke - two men who both had seats at the bar while the lethal subprime mortgage cocktail was being concocted by Wall Street - is for the birds. As is always the case with Warren Buffett, it pays to look at what he's doing - not what he's telling CNBC. And what he's doing is not what the U.S. Treasury wants to do with Goldman's sick brethren: he is not buying Goldman's "bad" assets. He is, instead, buying preferred shares with a nice fat yield." Henry Blodget concurs that Buffett's Goldman investment reveals the "dirty little secret" behind the Treasury's bailout plan: "The critical part of the bailout is the price the government pays for the trash assets it buys from banks. In short, if the government pays too much, the taxpayers will get hosed... Bernanke and Paulson want to pay a phantom "hold-to-maturity" price that is above the prices at which the banks are currently valuing their trash assets. The logic is that the banks' carrying value is somehow artificially depressed by a lack of liquidity... Warren Buffett, meanwhile, thinks the appropriate price would be the "market value," which he believes is below the price at which the banks are currently carrying their trash." Portfolio manager Chad Brand: "With this deal, Buffett is banking on government intervention succeeding in greatly lowering the risk that Goldman Sachs gets into deep trouble. For such a bet, I'd say Buffett got a great deal by waiting things out and not investing until he figured the odds were stacked strongly in his favor." Justin Fox comments that a "key to Buffett's success as an investor has been that he's never tried to call market tops or bottoms. He simply buys when things seem cheap and sells (or, more commonly, stays put) when they seem expensive. Eventually that approach almost always pays off. But for years on end, cheap can keep getting cheaper, and expensive can keep getting more expensive. So don't read too much into this news." Mike Steinhardt of HEDGEfolios is a bit bothered by everyone's "Warren worship": "As for this Goldman investment, it is already being spun as some kind of all-clear blessing on Goldman, the financial sector, the stock market, the TARP Bailout, and just about everything else that appears to be in trouble. After all, Buffett is the greatest investor of all time they say. He would never make this investment if he didn't "know" that the TARP was a done deal... as for me, I see this investment in Goldman to be an investment in Goldman. One that only Buffett could negotiate. All the people that might rush to buy GS common tomorrow to "mindlessly imitate" Warren will not come anywhere close to what he paid." For ongoing coverage of the market crisis and proposed bailout plan from the candid perspective of top market bloggers, visit Seeking Alpha's government policy section.
