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Monday, January 28, 2008

 

State of the (Dis)Union

Having just watched the President's final State of the Union speech, I was appalled by the behavior of Congressional Democrats, who refused to even politely applaud for much of the speech, no doubt in an effort to appeal to their base that hates Mr. Bush, as has been noted in the immediately prior post. There is a certain respect due the office which in my experience has always been shown, even by Republicans as they were trying to impeach President Clinton. That was not evident tonight, and I think it reflected poorly on the Dems, especially in contrast to the speech itself, which represented one of Mr. Bush's more forthright and diplomatic efforts (smirk and all). I'm sure the base reveled in the disaffection, but I doubt it enhanced the Dems' image in the minds of most independents.

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My source on the scene in Florida tell me that it will be Hillary and McCain in tomorrow's primary, and if that is right, that will all but end it for Rudy, who made Florida the linchpin of his strategy. Presumably, everyone who makes it through tomorrow will take their shot on Super Tuesday, but the polls seem to indicate that Rudy and John Edwards will have to give up the ghost after that. That will leave a two horse race in each party, with a particularly interesting contest shaping up on the Dems' side as Obama's campaign gains more credibility and Hillary's makes infantile mistakes. The notable development on the GOP side is the amazing perseverance of Governor Romney, who has put the Mormon issue on the back burner for now, and is finding that the realization by the public of economic problems plays to his strength. Still, it will be a shame to lose Rudy, who seemed to be the only true supply - sider left in the field (after Sen. Thompson's departure).

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I must say that I really enjoyed Nashville and the music emanating from the many little bars on Broadway. We heard quite a good mixture of country and rock and it reminded me of Bourbon Street (where there is very little jazz left, by the way). Not quite as raucous and certainly not as dangerous, though even more crowded in some of the bars, notably Tootsie's. I will be looking forward to my next visit.

I was there for a business meeting, which was generally quite excellent with fine presentations given by both my company's leaders and external speakers. It has become fashionable for execs to speak as outside speakers at other companies' meetings, and this seems healthy to me as we can all learn from each other. However, we had one speaker from a well-known investment bank who was nothing if not appalling. Among other comments that I would like to believe were disingenuous (but I am afraid were much worse), he characterized the securitization of the mortgage market as "effective" - this after some $120 billion of write-offs by the purchasers of those instruments (so far). He also described the making of a new market in insured lives in which participants could bet on mortality rates in the group, proudly proclaiming that this was put together in months without regulatory scrutiny. I didn't know investment banks were authorized to run non-regulated casinos! There were others, equally bad but too technical for the blog.

If I make a presentation somewhere, I have to run it by compliance and get my remarks approved in advance. Apparently, this procedure is not observed at the company this gentleman works for, or the compliance people are comatose. Of course, investment banking is not known for a particularly strong compliance function.

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A lot of people are amazed by the football Giants run, but if you are even a casual football fan and were watching at all, you had to notice the rapid improvement in that team throughout the season, and especially the very physical play of their defense, always a big factor in the playoffs. I guess New England has to be the favorite this week, but the line could be an overlay. I would say the Pats should be (at most) a 7-8 point favorite, and that may be too much. The Giants played an entertaining game with the Pats to end the regular season, and I expect another one Sunday. Of course, the commercials should be the highlight.

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I have to correct two mistakes I made from Nashville in the last post - as I expected I spelled Ceradyne wrong. Also, the price for BMTC was a much more appealing 20.26, not 22.01.

On Wednesday, I bought 200 shares of Avocent (AVCT) at 14.10. Today, I bought 50 shares of Ceradyne (CRDN) at 45.03. This rally still looks like mainly short covering to me, but in some stocks, the shorts may be getting a bit squeezed. We'll see if the rally has any legs. The market has priced in another rate cut by the Fed at the upcoming meeting, and that's a lot to ask (and a lot of cutting) given the recent 75 basis point cut between meetings. This raises the risk that stocks will be dumped if the Street doesn't get the cut. Also a lot of nasty surprises could still occur - more write-offs, a bond insurer downgrade, derailment of the stimulus package (itself not an unmixed blessing) in the Senate, etc. So people without the discipline of a system need to exercise a little discipline of their own here and nibble their way back in, not jump with both feet.

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