ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist&reg;.com: Duke's Damage Control</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style1 { font-size: x-large; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td width="116" height="118" rowspan="2" valign="top" align="left" xpos="0"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="24" height="118" rowspan="2"></td> <td width="465" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="18" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="283" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr height="26"> <td width="624" height="26" colspan="6" valign="top" align="left" xpos="0"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#149; <a href="articlesindex.html">ARTICLES</a> &#149; <a href="books.html">BOOKS</a> &#149; <a href="teflon.html">THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#149; <a href="mailto:letters@onlinecolumnist.com">REACTIONS</a> &#149; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="1"> <td width="116" height="2574" rowspan="2" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="489" height="1" colspan="3"></td> <td width="18" height="2574" rowspan="2"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> </tr> <tr height="2573"> <td width="489" height="2573" colspan="3" align="left" xpos="116" content valign="top" csheight="2573"> <font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="5"><b> <br /> Dow Looking Up</b></font><p><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b>by John M. Curtis<br> (310) 204-8700</b><br> </font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright April 3, 2009<br> All Rights Reserved.</i></font></p> <p><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</span><span class="style1">W</span>all Street usually leads the economy out of recessions and this time may be no exception.<span style="mso-spacerun: yes">&nbsp; </span>Recent economic news indicates, as Fed Chairman Ben Bernanke predicted March 15, the recession may be bottoming out.<span style="mso-spacerun: yes">&nbsp; </span>Just when the rest of the world counted the U.S. out as the leading economic power, Wall Street made a spectacular turnaround from its March 12, low of 6,500 to breaking 8,000 only three weeks later. <span style="mso-spacerun: yes">&nbsp;</span>When Wall Street rallies, American businesses have the cash to hire back workers, something not seen for some time with March job losses estimated at over 700,000.<span style="mso-spacerun: yes">&nbsp; </span>Before the White House traveled to London for the G-20 summit, global pessimists talked about dumping the U.S. dollar as the world s reserve currency.<span style="mso-spacerun: yes">&nbsp; </span>Watching Wall Street stage a furious rally climbing nearly 20% since March 12, shows that the world shouldn t bet against the U.S. economy.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>When proverbial Wall Street bear New York University Stern School economics professor Nouriel Roubini predicted the Dow s bottom at 5,000 March 9, the message was heard loud-and-clear at Goldman Sachs.<span style="mso-spacerun: yes">&nbsp; </span>Whether admitted to or not, the Manhattan-based investment bank acts as Wall Street s brain, determining the direction of the market.<span style="mso-spacerun: yes">&nbsp; </span>When Wall Street s kingmaker accepted $11.9 billion in bailout cash from AIG Insurance, eyebrows raised, especially because AIG Chairman Edward Libby sat on Goldman s board.<span style="mso-spacerun: yes">&nbsp; </span>With French President Nicholas Sarkozy threatening to boycott the G-20 unless real global restrictions were placed on key players like Goldman Sachs, it sent a loud message.<span style="mso-spacerun: yes">&nbsp; </span>Goldman Sach s sales of derivative investments to domestic and foreign banks, and AIG s lucrative credit default swaps, were largely blamed for the global financial crisis.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Wall Street kingmakers can be very bad or very good for the economy.<span style="mso-spacerun: yes">&nbsp; </span>Only lately, has Wall Street refrained from selling off, continuing to rise from its March 12 lows.<span style="mso-spacerun: yes">&nbsp; </span>When Wall Street got wind of another 720,000 layoffs, it didn t faze yesterday or today s rally, taking the Dow up to 7,978.<span style="mso-spacerun: yes">&nbsp; </span>When Wall Street talks about  investors, they re talking about the nation s biggest funds that get buy-or-sell signals from someone.<span style="mso-spacerun: yes">&nbsp; </span>  Everyone is in a buying mood, said Eric Ross, director of research at brokerage Canaccordd Adams.<span style="mso-spacerun: yes">&nbsp; </span>  Everyone is feeling good . . . A lot of this is simply confidence, perpetuating the same myth that mood or sentiment drives the market.<span style="mso-spacerun: yes">&nbsp; </span>When programmed trading kicks in, it s not based on mood, it s based on getting the buy-or-sell signal.<span style="mso-spacerun: yes">&nbsp; </span>Goldman Sachs recognized that enough-was-enough March 12, prompting the three-week long rally.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Nothing in the economy has fundamentally changed, with unemployment rising and real estate prices plummeting around the country.<span style="mso-spacerun: yes">&nbsp; </span>Yet, according to Ross, market psychology has changed.<span style="mso-spacerun: yes">&nbsp; </span>How about the fact that the March 12 bottom caused Bank of America sink to $3 a share and Wells Fargo, an otherwise stable financial institution, drop to $8 a share.<span style="mso-spacerun: yes">&nbsp; </span>Even J.P. Moragan Chase watched its stock fall to $15, compared today s close of over $28.<span style="mso-spacerun: yes">&nbsp; </span>Around the time Goldman Sachs shares bottomed $47 a share, AIG was handing the well-capitalized investment bank $11.9 billion.<span style="mso-spacerun: yes">&nbsp; </span>No one can explain why the government needed to bail out Goldman Sachs when their share prices soared compared to other financials.<span style="mso-spacerun: yes">&nbsp; </span>When Treasury Secretary Timothy Geithner looks into revamping Wall Street s regulatory scheme, he needs to look into what it takes to regulate kingmakers like Goldman Sachs.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>World leaders and finance ministers meeting at the G-20 in London asked for more teeth to regulate potentially disastrous U.S. investment policies.<span style="mso-spacerun: yes">&nbsp; </span>Their ending communiqué offered nothing about reining in investment banks like Goldman Sachs, whose derivative investments caused worldwide markets to tumble.<span style="mso-spacerun: yes">&nbsp; </span>Though the G-20 vowed to fund the IMF $1 trillion dollars, there was no mention of Russian and China s plan to replace the U.S. dollar as the world s reserve currency.<span style="mso-spacerun: yes">&nbsp; </span>All in all, President Barack Obama did a good job of reassuring nervous investors the U.S. is still the place to invest.<span style="mso-spacerun: yes">&nbsp; </span>China and Russia wanted a new reserve currency to raise cash by promoting bond sates within their countries.<span style="mso-spacerun: yes">&nbsp; </span>Despite the current economic mess, the U.S. is still the best place to invest foreign capital.<span style="mso-spacerun: yes">&nbsp; </span>While the rates are low, there s no safer place to invest than the U.S.<span style="mso-spacerun: yes">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span> </p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Wall Street came back from the dead just in time to give the economy hope for a late-year recovery.<span style="mso-spacerun: yes">&nbsp; </span> We finished a very productive summit that will be, I believe, will be a turning point in our pursuit of global economic recovery, said Obama concluding the G-20 summit.<span style="mso-spacerun: yes">&nbsp; </span>Obama takes his cues from his treasury secretary with deep ties to Wall Street.<span style="mso-spacerun: yes">&nbsp; N</span>o one knows for sure whether or not the last three weeks resets a bull market.<span style="mso-spacerun: yes">&nbsp; </span> It s premature to suggest that we re out of the challenges, said Richard Hughes, co-president of Portfolio Management Consultants, unwilling to bank on the current gains.<span style="mso-spacerun: yes">&nbsp; </span>Whether or not you call it  capitulation, the market turned on a dime, apparently realizing programmed selling was killing the U.S. economy.<span style="mso-spacerun: yes">&nbsp; </span>Before the cycle repeats itself, Obama and Geithner must look into programmed trading and do something about it.</p> <p>&nbsp;<u><b>About the Author</b></u></p> <p><b>John M. Curtis</b> writes politically neutral commentary analyzing spin in national and global news. He's editor OnlineColumnist.com and author of <a href="books.html">Dodging The Bullet</a> and <a href="books.html">Operation Charisma</a>.<br> </p> <p></p> </td> <td width="1" height="2573"><spacer type="block" width="1" height="2573"></td> </tr> <tr height="1" cntrlrow> <td width="116" height="1"><spacer type="block" width="116" height="1"></td> <td width="24" height="1"><spacer type="block" width="24" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="283" height="1"><spacer type="block" width="283" height="1"></td> <td width="18" height="1"><spacer type="block" width="18" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>Home</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> || <a href="articlesindex.html">Articles</a> || <a href="books.html">Books</a> || <a href="teflon.html">The Teflon Report</a> || <a href="mailto:letters@onlinecolumnist.com">Reactions</a> || <a href="aboutdiscobolos.html">About Discobolos</a></strong></font> <div align="left"> <p><font size="1" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">This site designed, developed and hosted by the experts at</font><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"> <a href="http://www.cmeonline.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">&copy;1999-2002 <a href="aboutdiscobolos.html">Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>