January 22, 2009 Edition

Good Morning All,

Okay, all long term Obama fans and recent converts, you can breathe now, because George really is gone, and the tide of common sense that went out with his arrival eight seemingly interminable years ago has begun its return to America, bringing with it both a sense of hope and an opportunity for renewal. As the new President has warned on an increasingly frequent basis, the times ahead will not be easy; nor will the solutions to the past travesty of mistaken and misapplied policies be simple or perfect in either their design or their implementation. Yet what we do know for certain is that the United States and the world will be far better served by this adult leader and his pragmatic cabinet than ever we were by the collection of self-serving ideologues they have replaced.

Today should see the final important cabinet approvals that will include the woebegotten Treasury Secretary Timothy Geithner, who received an important endorsement from Paul Volcker the excellent Fed Chairman who preceded the highly overrated Alan Greenspan. Whatever Timothy may have done (how could someone named Timothy be bad), his credentials on Wall Street are Triple A, for whatever that is worth these days. Assessing the value of such things, at least on a short term basis, was easy, even for the GOP, who have realized that this is no time to pick a fight with the the incoming missile of public popularity that has swelled for all things Obama. Markets began to reflect this wave of confidence yesterday as they combined with good news from IBM and some significant insider buying in the beleagured banks to post recovery gains, the continuation of which I would expect to see over the coming weeks as we approach the 1150 S&P 500 target this letter projected last November. Yes I know I said it would occur by mid to late January, but I also cautioned that "getting both the number and the day right" was an improbable task. We now need to close strongly above 860 for this thrust to achieve technical approval, a level that may be forthcoming today.

The world economy is not likely to show signs of recovery for some time to come as they await the return of open and liquid credit markets. It has been noted here that the LIBOR rate and the attendant TED SPREAD have shown signs of improvement in recent weeks, and that these are important monitors of the velocity of money, a term that should enjoy increasing analysis in the popular press; google all of the above for your Economics 101 course... you know, the one that Bush failed. Markets, however, as this letter so often reiterates, are predictors of the future, and express the buying or selling, not of past Christmas ghosts but of future realities...so get out of your present malaise and look forward.

In Canada next week's budget should offer both fiscal stimulus and a possible retreatment of the income trust issue. Look to these latter gifts (maybe for your tax free accounts) and to my favourite Canadian infrastructure company Aecon around $10.50 up from $6 in November. Investment banking is coming off its worst year in recent history so look for a ton of new issue product and a spate of merger and acquisition activity. GMP.UN in the low 5's will be a slam dunk beneficiary of such largesse. And just one more point....Barack's Chief of Staff Rahm Emmanuel is set to become a household name in the coming years but it won't be in the same way that H.R. Halediman or John Erlichman's was. Oh, and I nearly forgot...own some gold shares.