ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist®.com: Putin Punishes Georgia</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style2 { font-size: large; font-weight: bold; font-family: Arial; } .style3 { height: 69px; } .MsoNormal {} .style4 { 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="133" 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="7" height="118" rowspan="2"></td> <td width="482" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="1" 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="300" 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> <td width="624" colspan="6" valign="top" align="left" xpos="0" class="style3"> <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> &#8226; <a href="articlesindex.html">ARTICLES</a> &#8226; <a href="books.html">BOOKS</a> &#8226; <a href="teflon.html"> THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#8226; <a href="mailto:letters@onlinecolumnist.com"> REACTIONS</a> &#8226; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="2"> <td width="133" height="2">&nbsp;</td> <td width="489" height="2576" colspan="3" rowspan="2" align="left" xpos="133" content valign="top" csheight="2573"> <p class="style2">Retirement Fund Insurance</p> <p><b><font face="Arial,Geneva,Helvetica">by John M. Curtis</font></b><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b><a href="books.html"><br> </a></b></font><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b> (310) 204-8700</b></font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright October 29, 2008<br>All Rights Reserved. </i></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p> <p class="MsoNormal"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <span class="style4">S</span>lashing the federal funds rate 50 basis-points, Federal Reserve Board Chairman Ben S. Bernanke tossed ice water on a most fragile Wall Street rally, propelling the Dow Jones Industrial Average over 900 points Oct. 28.<span style="mso-spacerun: yes">&nbsp; </span>President George W. Bush begged the public for patience, urging banks to end the credit logjam, preventing businesses and consumers from getting credit.<span style="mso-spacerun: yes">&nbsp; </span>Wall Street likes rate cuts except this time around, signaling the economy is already into a deep recession.<span style="mso-spacerun: yes">&nbsp; </span>While only time will tell, slashing the federal funds rate to one percent tells investors that there s more pain ahead.<span style="mso-spacerun: yes">&nbsp; </span>Instead of expecting a booming economy, the Fed s rate cut signals serious economic upheaval.<span style="mso-spacerun: yes">&nbsp; </span>If the Fed s Open Market Committee saw any possibility of inflation, Bernanke would have left rates alone, possibly raised them.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke reads recession in the tealeaves.</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>Bernanke began slashing rates in 2007, seeing the housing meltdown dragging the economy to screeching halt.<span style="mso-spacerun: yes">&nbsp; </span>No one, including former Fed Chairman Alan Greenspan, saw the impending disaster, causing bankruptcies, acquisitions or government bailouts of some of the nation s most respected financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Countrywide Credit, the nation s biggest Mortgage lender, was sold to Bank of American Jan. 11, 2008 for the fire-sale price of $4.1 billion.<span style="mso-spacerun: yes">&nbsp; </span> Countrywide s CEO Angelo Mazillo cashed in his company stock and stock options before share prices crashed.<span style="mso-spacerun: yes">&nbsp; </span>Like other devious CEOs, Mazillo is currently under FBI scrutiny for securities fraud.<span style="mso-spacerun: yes">&nbsp; </span>Countrywide s failure was the first major instituiton to succumb to the subprime mortgage scandal, plaguing U.S. and global credit markets.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke sees more bad news ahead, slashing the federal funds rate.</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 has been looking to rally, after watching the Dow drop 6,000 points or 40% since Nov. 2007.<span style="mso-spacerun: yes">&nbsp; </span>More than $5 trillion in investors wealth has been lost since the market peaked July 11, 2007 at 14,000.<span style="mso-spacerun: yes">&nbsp; </span>Many investors have bailed out of mutual funds, fearing further erosion in capital positions.<span style="mso-spacerun: yes">&nbsp; </span> It was a panic sell in the last two minutes, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York, accounting for the sudden drop after learning General Electric faced a dismal earnings picture.<span style="mso-spacerun: yes">&nbsp; </span>Contrary to Rovelli s view, Wall Street doesn t panic, it methodically takes profits when the market has been sufficiently inflated.<span style="mso-spacerun: yes">&nbsp; </span>Given the market s 900-plus-poont rise yesterday, it made sense for institutional investors to unload positions.<span style="mso-spacerun: yes">&nbsp; </span>There s no  panic involved when fund managers place simultaneous programmed trades.</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>Bernanke and Treasury Secretary Hank Paluson, former CEO of investment bank Goldman Sachs, know that Wall Street must lead the economy out of recession.<span style="mso-spacerun: yes">&nbsp; </span>Wall Street can t perform its magic of financing American business unless small investors have trust in mutual funds that they won t gobble up investments and retirement savings.<span style="mso-spacerun: yes">&nbsp; </span>Wall Street s premier investment houses counsel long-term investing, when fund managers routinely place sell orders, when seeking quick profits.<span style="mso-spacerun: yes">&nbsp; </span>When the market rocketed up 900 points, a premeditated programmed buy caused the one-day rally.<span style="mso-spacerun: yes">&nbsp; </span>Funds make cake quick-cash on the spread between buying and selling, causing today s wild gyrations.<span style="mso-spacerun: yes">&nbsp; </span>It s difficult for Wall Street to restore credibility when it encourages long-term investing but does the exact opposite.<span style="mso-spacerun: yes">&nbsp; </span>Fund managers must follow their own advice and practice what they preach.</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>Buill markets start and continue when Funds keep buying, methodically driving the shares upward, or, at least, that s way it used to work.<span style="mso-spacerun: yes">&nbsp; </span>Hedge funds, or market-neutral investment strategies, routinely short the market, or bet on stocks going down.<span style="mso-spacerun: yes">&nbsp; </span>It s difficult to sustain a bull market when hedge funds continue to drive the market up or down on a daily basis.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke and Paluson talked recently about restricting short-selling of financial stocks to stabilize markets.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke should work with Paulson and Securities Exchange Commission chairman Christopher Cox to regulate hedge funds and other mutual funds from short selling.<span style="mso-spacerun: yes">&nbsp; </span>To restore credibility for institutions and small investors and to protect the wealth of the nation s pension plans, they must create insurance for qualified investment funds, the same way they protect money markets and certificates of deposit.</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>Yesterday s rally too often becomes today s sell-off, sacrificing the wealth of institutions and small investors.<span style="mso-spacerun: yes">&nbsp; </span>If mutual and hedge funds are in a fiduciary capacity to protect investors capital, then the U.S. government should find some way to insure investments.<span style="mso-spacerun: yes">&nbsp; </span>If the government really believes mutual or hedge fund investment is too risky for institutions or small investors, then government should ban risky investing for retirement accounts.<span style="mso-spacerun: yes">&nbsp; </span>Government insurance should be available for qualified funds that have a proven track-record of sound investing, much the same way that rating agencies rate government and corporate bonds.<span style="mso-spacerun: yes">&nbsp; </span>No investor should be duped into retirement investing too risky to qualify for federal insurance.<span style="mso-spacerun: yes">&nbsp; </span>Since American business and the economy depend on the stock market, the government should pony up and offer insurance for qualified funds.</p> <p class="MsoNormal"> &nbsp;<bAbout the Author</u><b>John M. Curtis</b> writes politically neutral commentary analyzing spin in national and global news.&nbsp; He's editor of OnlineColumnist.com and author of <i><a href="books.html">Dodging The Bullet</a> </i>and <i><a href="books.html"> Operation Charisma</a></i>.</p> </td> <td width="1" height="2576" rowspan="2"></td> <td width="1" height="2"><spacer type="block" width="1" height="2"></td> </tr> <tr height="2574"> <td width="133" height="2574" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="1" height="2574"><spacer type="block" width="1" height="2574"></td> </tr> <tr height="1" cntrlrow> <td width="133" height="1"><spacer type="block" width="133" height="1"></td> <td width="7" height="1"><spacer type="block" width="7" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="300" height="1"><spacer type="block" width="300" height="1"></td> <td width="1" height="1"><spacer type="block" width="1" 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">©1999-2005 <a href="aboutdiscobolos.html"> Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>