December 15th Edition

Good Morning All,

World markets are in the process of digesting last week's two major news events as it now appears that the probable auto bailout is outweighing the 'Madoff 50 billion dollar scandal". In the end this latter occurrence may well prove to be of less importance than the former even though the amount at stake here is three times as large. The Madoff affair has once again proven that even the world's largest banks (who appear to have been among the biggest victims) have no business handling huge pools of investment capital; just maybe they ought to stick to what they do best, lending and charging usurious transaction fees.

Challenging the copious number of possible winners in this year of the tragic comedy is the George Bush appearance in Iraq where he was not welcomed with open arms but with freshly unshod feet. This shoe throwing is apparently among the greatest of Islamic insults and strangely front runs the none too soon end to the American occupation of Iraq. After what may be a final cost of one or three trillion dollars (depends on what you include) this inane exercise in out of mind hubris will have been responsible for the displacement of 4.5 million Iraqis and the deaths of several hundred thousand others. It will have taken the lives of over 4000 "coalition" troops and permanently maimed many more. Remember forever that this deed was done in the wake of 9/11 and under the ostensible rationale of a search for "weapons of mass destruction". Remember also how quickly the lessons of Vietnam were sacrificed on the altar of self serving ideology. And while you are once again mulling all this crap, think about how 19 of the 21 September terrorists were Saudis, and that none were Iraqis or Afghanis. Remember as well the next time you hear a CNBC or Fox News tirade that the United Nations inspectors were right and that U.S. intelligence knew it. All this to replace a Sunni dictator with a Shia strongman who may become......?

The Federal Reserve meets today and tomorrow but it doesn't really matter, the real key to ending the deflationary fears are reflationary policies. So far the banks have all the money they need and they are keeping it, the thought most current among those in the investment community is that the neo Keynsians in the incoming administration will force the banks to lend the wads of fiat currency presently in their possession. This will spark an economic recovery but it will also lead to much higher inflation as the year goes on. We have lately seen evidence of this in the dollar weakness/gold strength trade, one that is likely to continue gaining attention. Hedge in precious metal or precious metal stocks for the coming year.

And finally for today the good news is that markets continue to fare reasonably well in the face of really awful news. LIBOR is well below two as is the TED spread. This is telling us that credit markets are finally beginning to loosen up. This, combined with a declining VIX or volatility index, is of major importance.

And finally, finally for all the Barack fans out there....Google Corrigan Brothers Obama and tune in to their Irish ditty;"there's no one as Irish as Barack Obama"