We're Gonna Party Like It's 1992

Not to belittle the role that the Fed has played in trying to stabilize and calm markets, but the guys with the real mojo have just arrived on the scene. In recent days, we've learned of TPG's $7 billion infusion in to WAMU. Today we learn that a host of private equity heavyweights are taking $12 billion of paper off Citi's hands at 90 cents on the dollar. I knew this would happen, only I was overly optimistic that it would occur well before now. Still, that it is happening is the most positive sign of anything we've seen to date that could reassure us that the crisis is ebbing. Yeah, I know the Saudis and the Asians dumped billions on Merrill and Citi, but those guys have so much money, they are happy to have a couple hundred basis points gifted to them on a decent chunk of petro-dough. And they're high octane functionaries. The buyout crowd - Blackstone, TPG, and the like - are the full bore capitalists. They have alot of money, but in their heads their resources are relatively scarce. They go for the big returns, the double digit returns. That's what they are in business to do, anything less they may as well work at Fidelity. These guys are in the homerun business. Oil sheiks and the government employees overseeing the Sovereign Wealth Funds are in the singles business. In other words, the real confidence inspiring money has arrived. Not bailout money, but serious investment capital. The difference is important. How are folks at TPG going make money on their investments? Well, aside from insisting that no more stupid things be done, they are going to insist that these banks get back to doing what we know makes money - traditional lending to creditworthy customers. Do you think TPG is saying "Here's $7 billion, put it Treasuries, but for God's sake don't lend to a small business that's been around for 20 years." Of course not, but we keep hearing that banks won't lend so we're due for a real bad slowdown.

So the last few days events are a big cause for optimism, but the market continues to slide. Why? Because the media will not allow for a hint of justified optimism. The doom and gloom theme has to last into the heart of the general election campaign. They want a repeat of 1992 when a recovery was already underway, but nobody knew because the media was so hot for a fresh young Democrat that had emerged from nowhere to challenge the old guardiest of an Old Guard Republican President.

Buy stocks.