Who is in Charge Here?

I recently tipped my hat to Bill Gross, as his views and portfolio positioning have been validated as evidenced by the rebound in his performance against his bond peers. He stood his ground and took his lumps, a rarity in today's myopic investment climate.

Not only is Bill back in the top-decile against his bond peers, but his monthly missive is up on PIMCO's website. It is pretty much required reading on Wall Street, and this month's piece is no different, and not because of the cameo appearances put in by Jim Cramer and Alan Greenspan:

The modern financial complex has morphed into something unrecognizable to many astute market veterans and academics. Bernanke’s fellow governors and Hank Paulson’s staff at the Treasury spread their roots during an era in which traditional banking activity – lending out deposits backed by a certain level of reserves – was the accepted vehicle for liquidity creation. Remember those old economics textbooks that told you how a $1 deposit at your neighborhood bank could be multiplied by five or six times in a magical act of reserve banking? It still can, but financial innovation has done an end run around the banks. Derivatives and structures with three- and four-letter abbreviations – CDOs, CLOs, ABCP, CPDOs, SIVs (the world awaits investment banking’s next creation; perhaps IOU?) – can now take a “depositor’s” dollar and multiply it ten or 20 times. Reserve banking, and the Federal Reserve that regulates the system, appear anemic in comparison.

I’m sure that Bernanke, Paulson, and their cohorts understand this, but it isn’t yet clear how much they appreciate it. Pimco

Yes, the inmates are running the asylum, something that Greenspan just figured out. The vigilante's have taken control of the U.S. dollar, and Gross believes the Central Bankers are in a pickle...

As I have pointed out in prior pages and Outlooks, globalization and financial innovation have enormously complicated the job of central bankers. Whereas in prior decades a “one size fits all” policy rate move has coincidentally and democratically affected households and corporations alike, the 21st century has ushered in an innovation revolution favoring corporations with global investment opportunities as opposed to individuals with daily bills to pay.

The market has bounced, but the risks remain the same. We might have navigated the immediate crisis, but the domestic equity market is likely more dangerous than it was a few weeks ago.

Every uptick moves us a little closer to the bear camp, and we might begin to heed their warnings.  Heated tempers and emotions are cooling off, and the higher stocks go the less we like ‘em. Doug Kass is not only steadfastly bearish, but standing tall. On Real Money Silver the song remains the same.

I am steadfastly bearish.
If you are a subscriber to Real Money Silver (TheStreet.com) you will enjoy my opening missive on monday - entitled THE DAY THE NYSE DIED (to be sung to Don McLean’s American Pie).

A long long time to go..
I could still remember when the 01 market made me smile.... Bears Take Their Lumps comments

Doug’s little ditty might not be appropriate for an iPod, but we are finally willing to hear him out. And while stocks might not be going down today, our model says net exposure should.

What Do They Know?
PIMCO
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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