POOR  RICHARD’S   REPORT                860-522-7171

                                                                                800-821-6665-watts

                                                                                860-315-7413- *

                                                                                860-208-0258Cell

                             Where Do We Go From Here?

            The Oct 11-12 weekend edition of the Financial Times (the Salmon Colored paper) had all negative articles on the global stock markets. Not one positive one I could find. The NYSE reported 2,500 new lows out of 3,400 traded. The G-7 held an emergency meeting in Washington DC. With the pendulum so far to one side it has to swing back. Today Monday, Oct 13, 2008 at noon there are only 2 new lows being made and the markets are soaring. It will be a long time before we see the new highs in the popular averages. We are being  taught a valuable lesson about greed.

            This is just a rally or a dead cat bounce. Imagine a farmer haying his field for the last time before winter sets in. The birds will flock to pick over the bugs that have been exposed and they will grow slowly as the temperature cools down. When the frigid weather sets in it is time for reorganization. We have just been hayed.  Just like the farmer’s field the market will come back under new leadership.

            Congress can do what ever they please, but this is a free country with entrepreneurs seeking their pot of gold at the end of the rainbow. In this free spirit country we will seek new avenues for long term growth. If one invested in Wal-Mart in 1970 today that person would have made 5,300 times on their investment Just keep your eyes open around you.

            All the learned men are coming forth with idealistic reforms for the financial reform. They won’t be able to put humpty dumpty back together again. They don’t have the right glue.

            We need a comprehensive reorganization and reform of our global markets. Sounds impossible? Well, since everyone is down globally there is a sensible way to get it going.

            Congress should expand the Securities Exchange Commission (SEC) from three members to 7 or 9. The other members would be made up of leading financial experts from member nations of the G-7.  Each member would have to be approved by a special US Senate committee to make sure their heads are screwed on right. Then they will be able to take our reforms back to their individual countries. Countries that do not follow our examples will not be recognized by participating countries. They will be playing an expensive form of Monopoly.

            The reason for this is if one country has an UPTICK RULE for short sales then the other members would be encouraged to enforce it on their own markets. The mandate should be “For the Common Good” and not how much money will be made. Get rich quick schemes attract individuals with smelly clothes and bad manners.    The reason for our own breakdown starts in Washington. Our Political parties were more intent on destroying the other instead of improving our lot. There is no love or forgiveness in Washington.  

            Events in Washington determine what direction our economy goes. That in turn affects the market place. We must keep watch on our politicians. The media is all over Sarah Palin, but ignoring errors made by Senator Biden during the vice presidential debate. He is chairman of the Senate Foreign Relations Committee too. I think he has the beginning of Alzheimer’s.

            Now I have maintained for several months the Uptick Rule as many readers know.

            In the 1990’s the freedom to know was passed on to securities research. This was interpreted that the general public should know what a select few knew. It is a noble idea, but not very practable in the long term. Many corporations have no idea what they are going to earn. If they guide the investor in the wrong direction they can face stiff fines or a day or two in jail. So they give out in the ball park figures that as the year goes by they keep refining it. Brokerage firms that had paid a pretty penny for good analysts were up against the wall. The general public did not know who to believe.

            Here is how it worked in the past and should work in the future. An analyst calls on company A and meets with the high ranking officer. They discuss each division of the company and the officers tell the analyst if he is hi or low. Then the analyst leaves and writes up a report that is sent back to the company for approval. Then more notes are sent back and forth until they both agree on the figures. Now both sides know what company A can earn. The research manager approves the report and it is finally published. Here the research firm should have three days to contact their clients. After that grace period the information can be made public for a nominal fee depending upon the number of written pages. Then management is able to correctly guide other analyst in the right direction.

            Repeal the Investment Company Act of 1940. This was for the protection of the baby industry of mutual funds. Some baby! It is a gorilla messing up markets. Take away their hidden and real fees and you will see a better performance. That industry is top heavy with unnecessary “management”.  They should trade like Exchange Traded Funds (ETF’s) with normal stock exchange commissions.

            No net trades. Every investor should know how much he is paying for the security. It is called Transparency and bond traders hate it.

            Finally the media must be reined in. An analyst once told me that when he goes “on the air” he comes up with his most speculative idea. If it hits he has a chance of being in the big time, if he is wrong everyone will forget. (Except for the analyst who wrote up “Gold is Dead!”  when it was $40 and ounce!)

            There is one ad that over the years has met all ethical and legal requirements and that is the Oppenheim Mutual Fund ads. The one with the four hands and they say an intelligible disclaimer at the end.

            Two Classic ads were Merrill Lynch’s “We are bullish on America”. They did not say the stock market. This was during the bear market of 1973-1982. The second one was “Smith Barney – they make money the old fashion way – They earn it!”  Smith Barney did not say you were going to make money. 

            If one had done the opposite of 99% of the “talking heads” that person would be way ahead.  I consider commodity ads outrageous. “Gold has never gone down” is one ad that turns my stomach inside out. 1982 into 1990’s was a downtrend.  The most speculative exchange has or implies you can not lose. Pure trash!

            Business leaders fined or jailed should apply to the spouse too. That will slow everyone down. One can not hide money in family accounts.

            Our Congress will pass punitive laws in order to insure reelection, pounding their hollow chests while bellowing “vote for me”. Meanwhile a lot of good folks will be out of jobs, and the recession could deepen.

            The shock and the horror that has happened will take years for the market to recover. In the meantime old leaders will fade away and new spring growth will emerge with beautiful colors and soon what5 has past will be ancient history except to a painful few.

            One final thought. To increase consumer confidence and to help the “little guy” instead of just the mighty institutions, we should bring back the usury laws15%-30 on credit cards is downright immoral. If the Democrats are so intent on helping the poor; why not help the ones going to the “poorhouse”?

                                    Goodbye inflation – Hello Deflation

                                                                                                Tuesday, October 14, 2008

This report has been prepared from original sources and data we believe reliable but we make no representation to its accuracy or completeness. Coburn & Meredith Inc its subsidiaries and or officers may from time to time acquire, hold, sell a position discussed in this publications, and we may act as principal for our own account or as agent for both the buyer and seller.                           

WASHINGTON: U.S. Congressional leaders and the Bush administration reached a tentative agreement Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.

Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.

The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program.

The administration had initially requested virtually unfettered authority to operate the bailout program. But as they moved toward clinching a deal, both sides appeared to have given up a number of contentious proposals, including a change in the bankruptcy laws sought by some Democrats to give judges the authority to modify the terms of first mortgages.

Congressional leaders and Treasury Secretary Henry Paulson Jr. emerged from behind closed doors to announce the tentative agreement at 12:30 a.m. Sunday, after two days of marathon meetings.

“We have made great progress toward a deal, which will work and be effective in the marketplace,” Paulson said at a news conference in Statuary Hall in the Capitol.

In the final hours of negotiations, Democratic lawmakers, including Representative Rahm Emanuel of Illinois and Senator Kent Conrad of North Dakota, carried pages of the bill by hand, back and forth, from Speaker Nancy Pelosi’s office, where the Democrats were encamped, to Paulson and other Republicans in the offices of Representative John Boehner of Ohio, the House minority leader.

At the same time, a series of phone calls was taking place, including conversations between Pelosi and President George W. Bush; between Paulson and the two presidential candidates, Senator John McCain and Senator Barack Obama; and between the candidates and top lawmakers.

“All of this was done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street,” Pelosi said at the news conference. “We have to commit it to paper so we can formally agree, but I want to congratulate all of the negotiators for the great work they have done.”

In a statement, Tony Fratto, the deputy White House press secretary, said: “We’re pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.”

A senior administration official who participated in the talks said the deal was effectively done. “I know of no unresolved open issues for principals,” the official said.

In announcing a tentative agreement, lawmakers and the administration achieved their goal of sending a reassuring message ahead of Monday’s opening of the Asian financial markets.

Lawmakers, especially in the House, are also eager to adjourn and return home for the fall campaign season.

Obama and McCain both expressed support for the rescue package early on Sunday, while adding that it was hardly a moment for taxpayers to cheer.

“This is something that all of us will swallow hard and go forward with,” McCain said in an interview on ABC’s “This Week.” “The option of doing nothing is simply not an option.”

Obama, in a statement, said: “When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration. But this step is necessary.”

The backing of the presidential candidates will be crucial to Congressional leaders seeking to generate votes for the bailout plan among lawmakers, especially those up for re-election in November. The general public has bristled at the notion of risking $700 billion in taxpayer funds to address mistakes on Wall Street, and many constituents have urged their elected officials to vote against the plan.

Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.

Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.

In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.

Officials said they had also agreed to include a proposal by House Republicans that gives the Treasury secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.

The Treasury would be required to create the insurance program, officials said, but not necessarily to use it. Paulson had expressed little interest in that plan, and initial cost projections suggested it would be enormously expensive. But final details were not immediately available.

Saturday’s intense negotiating effort followed a tumultuous week, including a contentious meeting at the White House with Bush and the two presidential candidates.

That meeting had moments of drama, including a blunt warning by Bush. “If money isn’t loosened up, this sucker could go down,” he said. It ended with angry recriminations after House Republicans scotched a near-agreement from earlier in the day.

Paulson scrambled to revive the talks, and they resumed almost immediately. Congressional and Treasury staff then worked all of Friday and through the night, ending in the predawn.

Paulson and Congressional leaders stepped in at 3 p.m. Saturday and were in direct negotiations for most of the rest of the night. And immediately after the news conference, staff members began efforts to finalize the language.

Even then, their work is hardly over.

Congressional leaders who want the bailout to pass with solid bipartisan support had already begun to anxiously court votes, mindful of the difficulty they could face in a high-stakes election year.

Public opinion polls show the bailout plan to be deeply unpopular. Conservative Republicans have denounced the plan as an affront to free market capitalism, while some liberal Democrats criticize it as a giveaway to Wall Street.

Representative Roy Blunt of Missouri, the chief negotiator for House Republicans, who have been among the most reluctant to support the plan, expressed some satisfaction but did not commit his members’ support.

“We need to look and see where we are on paper tomorrow,” Blunt said. “We have been talking about how we can make these things work in a way that our conference can come together.”

Representative Barney Frank of Massachusetts, the lead negotiator for the House Democrats, said that there was no expectation of making anyone smile.

“This was never going to be a bill that was going to make people happy,” he said. “No solution to a problem can be more elegant than the problem itself. We are dealing with a very difficult problem.”

“Given the dimensions of the problem, I believe we have done a good job,” he added. “It includes genuine compromises.”

Aides described a tense meeting on Saturday afternoon that included Senator Max Baucus, Democrat of Montana, shouting at Paulson about executive pay caps.

Outside, stunned tourists visiting the Capitol watched as camera operators shoved one another to get footage of lawmakers talking outside of the meeting room.

At one point, when too much information was leaking out, staff members’ BlackBerrys were confiscated and collected in a trash bin.

While Congressional Republicans sent only their chief negotiators, Blunt and Senator Judd Gregg of New Hampshire, at least nine Democrats with competing priorities piled into the meeting, surprising the Republicans but apparently not unsettling them.

The centerpiece of the rescue effort remains the plan for the government to buy up to $700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the economy.

The money will disbursed in parts, with an initial $250 billion to get the rescue effort under way, followed by another $100 billion upon a report by Bush to Congress.

The president could then request the balance of $350 billion at any time. If Congress disapproved, it would have to act within 15 days to deny the Treasury the money.

Early in the day, the two presidential nominees were active from the sidelines. McCain telephoned Congressional Republicans to sound them out, and Obama got regular updates by phone from Paulson and top lawmakers.

Some lawmakers have made clear that they will not vote for the bailout plan under virtually any terms. “I didn’t want to be in the negotiations because I object to the basic principles of this,” said Senator Richard Shelby of Alabama, the senior Republican on the banking committee, who would normally be his party’s point man.

Pressed about his role, Shelby replied, “My position is ‘No.’ ”

Officials, including Bush, stepped up efforts to sell the plan to the American public, which, according to opinion polls, is deeply skeptical.

“The rescue effort we’re negotiating is not aimed at Wall Street; it is aimed at your street,” Bush said in his weekly radio address. “There is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled assets.”

In a brief speech on the Senate floor, Senator Kent Conrad, Democrat of North Dakota, said: “It’s not just going to be Wall Street. The chairman of the Federal Reserve has told us if the credit lockup continues, three million to four million Americans will lose their jobs in the next six months.”

The ultimate cost of the rescue plan to taxpayers is virtually impossible to know. Because the government would be buying assets of value — potentially worth much more than the government will pay for them — there is even a chance the rescue effort would eventually return a profit.

Some Democrats had sought to direct 20 percent of any such profits to help create affordable housing, but Republicans opposed that and demanded that all profits be returned to the Treasury.

Jeff Zeleny and Robert Pear contributed reporting.