Street Justice: The Three Wise Men

Hey all! Big day today. We heard from Treasury sec. Hank Paulson, Fed Chairman "uncle Ben" Bernanke, SEC head honcho Chris Cox and President Bush. Not to mention a whole slew of companies including INTC/Intel announced earnings. The things we heard from "the 3 wise men"(Paulson, Bernanke and Cox) had a pretty big impact on both the stock market and the dollar. I was surprised by how much of a positive impact they actually had today with what could be considered bleak news. What the 3 wise men and GW said today was so important I am devoting today's blog to it. I will be back tomorrow with some new companies.
Ben Bernanke or "Uncle Ben" as I affectionately refer to him(mostly cause his name is Ben and he looks like uncle Ben from the rice box), would have to be near the top of my list of people I want to meet. He is a very smart, very well-spoken individual. The media seems to think he didn't have many positive to say about the economy and the future. I guess it's all a matter of perspective because I was quite reassured by his testimony(before congress). One thing that he mentioned that I wasn't aware of was that 2nd quarter growth was better than expected. He also said the US can expect a "healthy" but not an "exuberant" recovery. Uncle Ben also testified on the housing sector. He said the housing sector was the center of their(the feds) financial concerns and that it should stabilize late 2008 or 2009. I was really stoked that he touched on speculation too. He said that speculation does not have a significant effect on prices and that it(speculation) can be helpful to the economy. According to "uncle Ben" the stimulus package(rebate checks) did and is working, but it is too early to tell if another one(stimulus package) is needed.
Hank Paulson, the US Treasury Secretary had a bunch to say to congress as well. Paulson believes that Fannie and Freddie are the keys to pacing our recovery and maintaining stability. He outlined a 3 point plan for congress. This plan was designed to support or protect our financial markets, all of them not just Fannie and Freddie. This plan calls for an 18 month temporary increase in authority for the fed to give credit to these GSE's(Government Supplied Enterprises) if the fed deems necessary to maintain US economic stability. Paulson also requested temporary authority for the fed to purchase equity in GSE's and access their information, again if the fed finds it necessary. The Treasury Sec. recommended this plan because "the GSE's have the potential to cause systemic risk and must be regulated." Hank also suggested to congress that they appoint a "regulator" to oversee the economy as whole. He said this regulator should be "world class" and "strong". Congress tried to push Paulson to give them a dollar amount for the limit of help that should be available to the GSE's. Paulson told Congress that it would only hurt the situation if there was not a "blank check" available for this plan. Both Congress and Sec. Paulson agreed not having to use the plan would be the best case scenario.
SEC Chairman Chris Cox was also on the panel testifying to Congress with Paulson and Bernanke. Cox was all business. He stated that the SEC has 4 dozen pending investigations in the sub-prime lending area. The SEC is focused on sub-prime lenders and others involved in securities. The SEC's contribution to the Fannie, Freddie and GSE problem was a promise or threat to enforce penalties for "naked" short selling(not actually borrowing the stock you're short selling). This is an attempt to get short sellers to put their money where their mouth is.
I can't believe I am saying(writing) this, but I have something in common with President Bush. I won't get into politics so lets just say I'm not GW's biggest fan. Anyway, he had a news-conference today. His response to a question about when he thought the economy would recover was the smartest thing I've ever heard him say. He said "I don't know, I'm not an economist, I'm an optimist." As you all should know by now, I too am an optimist. I'm pretty sure that's the only thing GW and I have in common. Bush touched on a few other topics like his broken record off-shore drilling routine and the need to support Fannie and Freddie(common theme today).
The market seemed to react to the comments today almost immediately. I saw green in most of my portfolio which also happens to be full of the companies I recommend. When the market opened I thought it was gonna be a really bad day, but it would seem the slightest bit of hopeful news was enough to start a rally.
Forex trading was even crazier than the market today. The dollar started out struggling(as usual), but a combination of huge oil sell-offs by banks raising capital and the words of the "3 wise men" was enough to bring it back in the later day. It was back to true form again though down like 80 pips from it's highs against the EURO. I was watching the "3 wise men" testify to congress on TV while I traded their comments and the oil news in my Forex account. I did quite well.
If we could have this much going on in the financial world everyday, I would love it. It sucks that the economy has to get to this point before the powers that be take action. Being the optimist that I am though, I'm just glad they're taking action and I think all will work out. I'll be back tomorrow as usual with a few stocks to shock your portfolio back to life, cause we're all in this together. Thanks for reading.