..... to be the candy-crapping Unicorn.
That's The President, of course.
President Obama is quickly learning by example that one does not game the market. Specifically, one does not write checks with one's mouth that they are unable to cash.
Further, I must take exception with his "economic baseball bat" threat game that was played to try to force through his "stimulus plan." Such puerile tactics evoke reminders of President Bush - or more simply, a petulant child.
This isn't, of course, what The President would like people to see. At least I doubt it is. What's worse is that it points out that President Obama has gotten run over by Pelosi and Reid, who between them might be able to find two firing neurons.
The market, while often petulant itself, outclasses both Reid and Pelosi even on its worst days. Thus, the mini temper tantrum that is being thrown this morning.
We are, of course, going to get both a Stimulus Bill (which will not stimulate) and a "bank rescue" plan, the latter of which may or may not actually solve anything. To the extent that the latter tries to add to the staggering $9.7 trillion in guarantees or spending that have already been committed (an amount fully twice that of the public float of Treasury Debt) there's rather likely to be some serious backlash in the bond market. Indeed, that the bond market hasn't already thrown up all over itself is a tribute not to Bernanke's and Treasury's grand abilities, but rather to the fomented stock market crash of September and October that got more than a "small push" from Ben's Merry Men right at the appropriate point in time.
This game has now run its course. While further crashes can be initiated in the market (or simply initiate on the fundamentals all on their own) they are no longer likely to engender a run into Treasuries; at this point they are more likely to evoke fear of a complete economic collapse in the United States and thus a departure of assets from the nation as a whole.
If the "bank rescue" plan fails to apply appropriate wood to the rear ends of the actors who did the evil things, then it will also fail to clear the market. Stuffing the Treasury's Balance Sheet full of used toilet paper won't solve a thing - in fact, it will increase borrowing costs for everyone with even more certainty than would doing nothing.
While many people bemoan "frozen" credit markets the truth is that the market is frozen because of a fundamental difference of opinion on price. There is no problem with selling these "assets", provided you're willing to accept the market's judgment of value. Banks aren't, which is the root of the issue. Instead they are stubbornly insisting that the value is somewhat close to "par", or 100 cents on the dollar, when in fact the market says they're worth much less - perhaps 20 or 30 cents.
Who's right?
That's simple: The market is never wrong as to today's price.
Tomorrow things may change, but for today, the market price is the only price that matters, because it is the only price at which that asset will trade.
Millions of home sellers are finding out the same thing. Their Realtor may say they think their house is worth $300,000, but if nobody will offer more than $200,000, that's the market price. The seller has two options - either continue to believe in their price and not sell the house, or accept the market's judgment. That's the beginning and end of it, whether the seller likes it or not.
Such it is for car dealers, retailers of expensive electronics and bank presidents who have a metric ton of what the market has deemed "trash" on their balance sheets.
Many people say that eliminating or suspending "mark-to-market" would help. This is a canard - mark-to-market, or market value, is in fact the only way that markets work in the first place! Deeming values by fiat, no matter who comes up with them or how, is the mark of a command economy Soviet-Style, and history has proved over time that it simply does not work, because unwilling buyers are no buyer at all.
Steve LIESman this morning on CNBS said a curious (and alarming) thing - he wants The Fed to take credit risk even though he acknowledges that the law does not permit that. The Fed has this constraint on its balance sheet and Bernanke's action for a very good reason - only The House can originate a spending bill, and if you take credit risk and are wrong, then you have spent taxpayer money.
In other words, Steve Liesman says that The Fed must knowingly and willfully violate the United States Constitution and the law by doing that which The House refuses to authorize.
Mr. Liesman and CNBS will, of course, never allow anyone such as myself to debate his "opinion" on the air, for if that was to happen Mr. Liesman would lie eviscerated on the floor in the eyes of the viewing public when that "debate" was finished.
Don't worry; I'll have my fun this afternoon on BlogTalkRadio (see the right sidebar) at 3:30 PM CT ripping this idiocy apart - Mr. Liesman is hereby specifically invited to call in as a guest for that debate "on-air", if he has the gonads to participate on a level playing field. If you're reading this Steve and are willing, use the "contact" link to get ahold of me; I'll even tie half my brain behind my back just to make it fair.
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