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Goldilocks, 8, Economic Pioneer, Dies 10/23/2008

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Goldilocks, beloved daughter of the modern economy, died peacefully at her Greenwich, CT home this morning. She is survived by her father, Alan Greenspan, and her adopted siblings the three bears. She will be best remembered for economic developments such as the “jobless recovery,” exotic derivatives and grossly irresponsible lending and borrowing. Goldie, as her closest companions referred to her, brought much joy to the lives of millions of borrowers as well as a legion of financial gurus. Moreover, she managed to completely eradicate risk on Wall Street.

Born in late 2000 in a run-down tenement in Silicon Valley to Mr. Alan Greenspan and his wife Pollyanna, Goldilocks gained notoriety in 2002 helping the domestic economy claw out of a recession using her flowing locks to cushion the fall, creating a soft landing. Prosperity followed as boardrooms across the country soon found themselves rich beyond their wildest dreams. Wiping his tears with a hundred dollar bill, a CEO of a major financial institution attending the memorial service gave a touching eulogy remembering the time that he and Goldie spent a two-week getaway in the Greek Islands aboard his yacht “SarbOx”.

Bedridden since early October, Goldilocks had been suffering from pneumonia thought to be brought on by the freezing of the credit markets. Vigorous efforts by Doctors Bernanke and Paulson, two of the economy’s eminent physicians, failed to revive the stricken little girl. Goldie’s three closest companions, the three bears are enraged. Papa bear, hot under the collar, stated at the memorial that he intends to make those responsible for the death of his darling Goldilocks pay. Mama Bear coldly stood by his side while Baby Bear stated that whatever happens to the stock market will, in his eyes, be “just right.” Rest in peace Goldilocks. We on Wall Street will remember you fondly.

In all seriousness, this morning’s testimony by Alan Greenspan marks the end of an era. Once the darling of the legislative branch, Mr. Big Stuff faced a hostile barrage of questions by Senators eager to get to the bottom of the financial fiasco. Unfortunately, there is only one answer to how we got into this mess, and the Senate refuses to acknowledge it. A noxious mixture of greed and stupidity on the parts of not only banks and Wall Street executives, but their constituents as well. The economy and the markets now find themselves in truly uncharted waters.

The truth is that they can throw another $700 billion down the rat-hole and it isn’t going to magically fix things. What needs to happen is comprehensive reform of the shadow banking system. Dub it socialism or deride it as an assault on the American Way, the truth is that the system is fundamentally broken and is in a state of disrepair that cash infusions cannot fix. Until Joe Plumber, nee six-pack, has faith that something tangible is being done and the Masters of the Universe are behaving properly, the stock market is in for a bumpy ride.

We issued a MACD buy signal, but it must be taken with a grain of salt. We are not advocating jumping whole-hog into the markets. Rather, we are monitoring developments with a bullish bent. Currently, there is blood in the street, but the sucking chest wound is not being properly treated, and until medics dress it, stocks don’t stand a chance, seasonal MACD buy signal or not.

President Bush is meeting with the leaders of the G-20 nations November 15. Although this meeting should have already happened, and waiting another month is unconscionable, it is a course of action that is likely to help. Reform the system first, and then flood it with cash; simply pumping money into it is futile.

Please Trade Carefully.
J. Taylor Brown, Director of Research