Magritte, The Grinch and the Government 11/21/2008

Good afternoon,

The Surrealist, René Magritte was born today in 1898. Despite my rationality, I feel sometimes as though we’re living in Surreal times. In his “Son of Man” painting René Magritte tries to illuminate the fact that “Everything we see hides another thing, we always want to see what is hidden by what we see.” The bowler hat wearing businessman with the apple in front of his face feels a lot like what’s happening in the market. A senior trader I know has said “there’s a bottom in here somewhere.” Can someone please eat the apple?!

As we enter into the family time of year, I am glad to see Fannie and Freddie suspend foreclosures through the holidays. After yesterday’s Initial Unemployment Claims, I thought Christmas would surely be stolen by the Grinch.

“I’m from the government and I’m here to help you.” The government bushwhacked the market yesterday. Yet, we’ve seemingly responded well to knowing who some of the new players are going to be in ’09. Ironically, the banks that were forced to take TARP funds have all declined an average of 48.5%. If that’s a rescue, please stop helping me.

Napalm and rocket fuel smell an awful lot alike. The S&P 500 has declined by more than 40% only once before in the past 207 years… Thus far, 2008 has not been that proverbial hundred-year flood, but rather the two-hundred year flood. This suggests a better than 99.5% probability that such an event is unlikely’. The “fear bubble” will also burst.




Sources: Proprietary PIA Merrill Lynch Research, Art Cashin – UBS,. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of November 21, 2008, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Merrill Lynch to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Index performance is shown for illustrative purposes only. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. A portion of the income may be taxable. Some investors may be subject to the Alternative Minimum Tax (AMT). You cannot invest directly in an index. Discuss your investment needs with your financial professional before investing.