Did anyone watch or read Henry Paulson’s speech today? Today, the Secretary of The Treasury unveiled a sort of blue print for the future regulatory framework for our country’s financial system. I wasn’t paying much attention because Paulson himself said that it would take years to hash out and implement and wouldn’t have a direct impact to what was currently happening in our world. So I got back to doing whatever it was that I was doing, hearing Paulson drone on behind me. Suddenly, I look at my little ETF portfolio of short financials and short real estate…and its getting pummeled. I let out an audible WTF??!! All the news over the weekend and that morning was bad, why the heck were the financials rallying?? I pull up Bloomberg Top Stories and number 1 is this:
"Paulson Backs Regulatory Overhaul, Broader Fed Role. March 31 (Bloomberg) -Treasury Secretary Henry Paulson proposed the broadest overhaul of U.S. financial regulation since the Great Depression, saying American capitalism needs to be better prepared for ``inevitable market disruptions."
Umm, okay maybe I missed something important because the financials are starting to run right up my tucas! So I read the next paragraph:
"Our current regulatory regime is almost solely focused above ground at the tree level,'' Paulson said in remarks at the Treasury in Washington. “The real threat to market stability is below ground, at the root level where the health of financial firms is intertwined.”
Holy cow…roots? Trees? Paulson is doing an impression of Peter Sellers famous character, Chance the Gardener from the great movie “Being There”!!! Paulson is talking in gardening metaphors and the market is so desperate for anything that looks like leadership that its rallying off this….fantastic!! Do you remember “Being There”? If not, here is the readers digest version. Peter Sellers is Chance the gardener. He lived his whole life being cared for and working for some wealthy woman in a Washington DC townhouse. He is slow witted, utterly simple and has never been outside the grounds of the townhouse…..ever! All he knows is the garden and television. One day the wealthy woman dies, the house is sold and middle aged Chance is cast out onto the streets of DC (It’s the late 1970’s) wearing a 1940’s style suit and his suitcase. He has no idea how to do anything! Long story short, he gets hit by a car. Not just any car, but Shirley Maclaine’s car! Shirley is the wife of an older Washington master power broker….the guy who picks and advises presidents.
He is taken to their vast estate and when asked his name he says, “Chance the Gardener”. This is mistaken for Chauncey Gardener. A series of events take place where everyone mistakes his simplicity and honesty for a Zen-like genius! He relates everything he says to gardening because that is all he knows. Anyway, one day the president himself comes calling on “Chauncey’s” new host…Benjamin Rand…the kingmaker. The economy is in crisis and the president must make a speech. Benjamin calls “Chauncey” in and this is what takes place:
President: Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?
[Long pause]
Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.
President: In the garden?
Chance the Gardener: Yes. In the garden, growth has it seasons. First comes
spring and summer, but then we have fall and winter. And then we get spring and summer again.
President: Spring and summer?
Chance the Gardener: Yes.
President: Then fall and winter!
Chance the Gardener: Yes.
Benjamin Rand: I think what our insightful young friend is saying is that we
welcome the inevitable seasons of nature, but we're upset by the seasons of our economy.
Chance the Gardener: Yes! There will be growth in the spring!
Benjamin Rand: Hmm!
Chance the Gardener: Hmm!
President: Hmm. Well, Mr. Gardner, I must admit that is one of the most
refreshing and optimistic statements I've heard in a very, very long time.
[Benjamin Rand applauds]
President: I admire your good, solid sense. That's precisely what we lack on Capitol Hill!
With that, Chauncey becomes the hit of Washington! Of course I’m thinking, Jeez, did Hank Paulson pull “Being There” out from Netflix and try to pull a “Chance the Gardener”? I believe he did and for a few hours it worked! I of course used the opportunity to buy some more of those short financial ETFs a few points lower and wouldn’t you know it, Lehman came out with a 3bb equity raise at 4pm! Back to the garden Chauncey!!
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