11/01/2008 05:12 am ET Updated May 25, 2011

They Should've Passed The First Proposal

They should have passed the first two and a half page proposal! Our elected representatives said they needed more time to consider such sweeping and important legislation. What they wanted was time to dress the bill up with bells and whistles that make McCain's tirade against earmarks sensible. Two Oregon Senators, one a Democrat and one a Republican, put in an earmark for the Rose City Archery Co. It's an Oregon based company that makes arrows used by children . A provision repeals a $.39 excise tax on wooden and fiberglass arrows. It will save the Rose City Archery Company some money. Thank God for our diligent legislators! This is one of dozens of tax breaks that cover Hollywood producers, stock car racers and Virgin Island rum-makers. At least the rum is important. Makes you wonder ! ( And thanks to my colleague here at Soleil, Ian Horowitz who spotted this one.)

I have been talking about estimated earnings for the S&P 500 in 2009. Jason Trennert of Strategas and I are both pretty cautious. Not as cautious as David Rosenberg of Merrill Lynch who thinks earnings in 2009 will be below $70 against the guess (and it is a guess) I have of $77. The "bottom up" number is $103. I asked around and a couple of data services that survey Wall Street strategists for their numbers says the "top down" number is $96. If $96 is correct then the market is currently trading at only 12 times. I can't see a number that robust, but thought I would pass the info along.

There have been 26 trading days since 1990 where the S&P fell by more than 3%. It has taken on average 17 days for the market to recover that lost ground ( thanks Credit Suisse.) J.P.Morgan's excellent strategist, Thomas Lee, issued a report tracking the performance of the market after the VIX breached 48.5. The VIX is a convoluted but effective measure of fear and terror in the market. There have been only four occasions when the VIX was 48.5 or higher - a sign of extreme fear. The other day's almost 800 point Dow decline was the fifth. In the prior four occasions the market was higher 1 week later by an average of 7% with no down occurrences, higher 1 month later by an average of 11% again with no down marks, higher 3 months later by 15% ( no downers) and higher 6 months later by an average of 20% ( no downs.) Records are made to be broken, but this is interesting data.

What is also interesting is that GE sold Uncle Warren Buffett a slug of preferred stock. GE a AAA rate credit is paying 10%. At least it's the same as the Goldman interest rate. But 10% for a AAA ? The credit markets are tough ! Or Warren is a tough negotiator. Or both. But GE, Citi, Goldman, J P Morgan, and Morgan Stanley have raised about $55 billion in new capital these past few days. Money is available which is why I am optimistic we are not at the end of the world. Forbes Magazine stated that American consumers have $7.4 trillion in banks in one form or another. The move to expand the FDIC insurance is a good one (maybe not as good as the Rose City Archery move, but still good), and could go a long way to bolster confidence and get the interest markets more liquid.