Yesterday, Chris Dodd wrote an editorial on Politico that began with this line:

"The financial crisis that has shaken the American economy did not happen by accident."

That sounds open and shut to me; the U.S. economy was crushed on purpose. The inference is that Wall Street deliberately killed the goose that laid the golden egg. Then, the soon to be retired senator went on to say:

"It was caused by outrageous greed and recklessness on the part of some in the financial sector. And it was enabled by the failure of our outdated regulatory system to stop those abuses."

The reality is that there are so many rules and so many regulators the system wasn't outdated. As it turns out, the guys in charge had more in common with Barney Fife than Elliott Ness.
But admitting that would make the government more culpable and mitigate their argument that the guys on Wall Street were so smart they played the system. The fact is that regulators had the power but didn't implement it properly. Unlike Barney Fife, these guys had bullets in their guns, and some even had bazookas, but they didn't know what the heck they were doing. More power + incompetence = disaster. Be that as it may, there are areas like credit card abuses that need to be re-tooled. I even think that the CDS market needs to be more transparent.

The thing is that all of this stuff could be done within the existing frame of regulators. I don't know if that's going to happen, however. Everyone has an opinion on this stuff, by the way.

* Chris Dodd wants a watchdog to operate under the Treasury Department with rule-writing abilities.
* President Obama wants an independent Consumer Financial Protection Agency to regulate credit cards, mortgages, and other matters.
* Yesterday, Senator Shelby of Alabama proposed a watchdog under the FDIC with some rule-writing power. The director would be appointed by the White House and confirmed by the Senate.

I happen to think that Shelia Bair is doing a wonderful job handling the avalanche of bank failures since last year, but the FDIC doesn't have any money and can't afford to fund this new watchdog entity.

I think that something will be cobbled together, and it will probably have bi-partisan support. But the Volker Rule looms large, and I'm not sure there will be any compromise. There is no doubt that the White House wants to crush Goldman Sachs (GS) despite the back door bailout via AIG. In the meantime, leaders in Europe are prepared to go to war with Goldman Sachs or any purchasers of CDS on Greek debt. "If the Greeks hold onto the strict parameters and the markets continue to speculate against Greece, we will not let them just March through." This statement was made by the head of the Eurogroup of finance ministers. Also, Luxemburg Prime Minister Jean-Claude Juncker told a newspaper "we have the torture equipment in the cellar, and we will show them if needed" when commenting on how the EU would fight back against buyers of CDS on Greek debt.

I think that he also went on to say he would get a couple of hard, pipe hitting brutes, who'll go to work with a pair of pliers and a blowtorch. In other words, if Goldman Sachs and others want to force Greece toward bankruptcy then the EU will get medieval. The CDS market is out of control; it's nuts that I can in essence buy insurance on my neighbor's home. They aren't nice guys but we must be careful not to let the unrelenting stoking of public scorn allow for the creation of an anti-capitalism agency that limits profits and finds a new way to fulfill the key vestiges of the Community Reinvestment Act, which holds as much blame for the current circumstances our nation is in at the moment. After all, the financial crisis that has shaken the American economy did not happen by accident.

By the way, Goldman Sachs made $100.0 million a day 131 times last year through trading. Wow...I'd fight tooth and nail to keep that going, too. But I would chill out on CDS beyond basic hedging.

By the way, if a healthcare plan is going to be rammed down out throats then at the very least I think congressmen and senators must be forced to take the same plan. I even believe the President should show solidarity with Americans and also accept what he is demanding the masses accept. There is a resolution proposed by Rep John Fleming of Louisiana that aims to get our brave politicians to eat their own cooking. So far 2 million Americans have replied to the call to ask their reps to do the right thing.

http://fleming.house.gov/index.cfm?sectionid=55

http://fleming.house.gov/images/FLEMING%20HEALTH%20CARE%20RESOLUTION.pdf

The Market

I love the action in the market, but it's still early in the week. Nonetheless, I must stress to everyone that the economy can suck and the market can move higher. See 2009. I must stress that while the greatest risk to our long-term prosperity are attempts to change our nation from one of pulling its bootstraps to one that sits around and waits for the government to take care of basic needs in life, I think that threat is being beaten back. Saying these things doesn't suggest a double-dip in the economy wouldn't hit stocks hard. It probably would, but I think it would be short-lived, too. As for fighting back big government this isn't going to be easy as it is the ultimate goal and will be tried over and over again.

In the meantime, don't ignore the action in the market. Stocks act like a bull in a chute ready to bolt out of the gate. My parameters are the same:

* 10,450 key resistance on the DJIA, and then 10,750 is the true breakout point.

There was some good acquisition news yesterday and that helped, although it's interesting that foreign companies see the urgency to buy American companies and are offering attractive premiums. It's not like U.S. companies don't have the cash, or even pretty good share prices, to make a move. According to Biryini & Associates, S&P 500 companies are sitting on $3.2 trillion in cash! Take out financial companies and the tally is $1.1 trillion, an all-time record, and 11% of total assets (the highest percent in 60-years, typically cash is 8% of total assets). The money is there. The good news is that we are seeing bigger share buybacks. For the week that ended February 26, companies announced $13.23 billion in share buybacks, up from $1.07 billion in the year earlier period that ended February 27, 2009.

After the bell, Qualcomm (QCOM) hiked its dividend by 11.8% to $0.19 P/S and announced a new $3.0 billion share buyback. This is a huge vote of confidence.