(Washington, D.C., Right Commentary):  It’s a good thing that most office buildings in Manhattan have drop-in glazing. The windows are reinforced glass that is held within an aluminum frame. It’s called drop in glazing because when they windows are mounted, the windows are just “dropped in”  by the aluminum frame and bolted to the iron frame of the building. This design makes it nearly impossible to break the window or for it to be blown out, which is a very good thing. Given how the market reacted today to the bailout, I have no doubt that drop-in glazing saved many a broker from throwing himself out the window and landing on the pavement.

Today’s markets plummeted around the world reacting to the bailout bill, worries about the broader credit markets, and the lack of reaction by most Western governments to what is undoubtedly a broadening financial crunch around the world. Panic swept through the world’s financial markets, wiping $2.5 trillion from share values, amid concern that regulators and politicians were struggling to get a grip on the worsening crisis of confidence.

Share values plunged as some investors sold at any price and retreated to the safety of gold and government bonds. The FTSE 100 posted its biggest ever points fall, down 391 at 4,589, and at 7.85 per cent its biggest percentage fall since Black Monday in October 1987, reducing the value of British blue-chip companies by £93 billion.

The Dow Jones Industrial Average fell 370 points to 9,956, the first time it has sunk below the 10,000 mark in four years. At one point it was down 800 points. This morning in Tokyo, the Nikkei 225 index fell more than 5 per cent within 30 minutes of opening.

The good news in all of this - to the extent there is any good news - is that there is increasing acknowledgement that the US market is likely to be bottoming out and that belief is strengthening the US dollar. Last week the dollar strengthened against a number of major currencies including sterling and the euro. The greenback was up as concerns that the financial crisis was spreading to the euro zone took hold.

Further bolstering the dollar is the reaction of investors to the complete inability of our European partners to get their collective act together. The market was disappointed with the outcome of a European Credit Crisis Summit on Saturday attended by European heads of State including Britain, Germany and France. It failed to announce any plan similar to the U.S rescue package. “It appears that European governments are failing to grasp the real problem and are taking reactive measures instead of dealing with the underlying situation,” said a London-based currency strategist from BNP Paribas SA.” Traders will be taking note of key data releases this week to determine whether there will be more upside for the U.S currency.

In addition, oil prices have been in a free fall since last week, stopping today at about $90/barrel. Analysts have stated that the fall in the price of commodities generally predicts overall economic slowdown and recession worries. I would suggest that the price does not reflect future demand concerns (since the cycle for demand slowdown is not immediate) but rather, a deflation in oil prices is largely attributed to the increasing attractiveness of the U.S. dollar and the fact that oil was largely used as a dollar hedge this past 9 months. Nevertheless, the fall in the dollar will undoubtedly lead to lower gas prices in the United States and elswhere. This is welcome at a time when many are predicting significant drops in consumer spending and consumer confidence.

Many who hoped the President signing the “bailout bill” would alieviate the pressure were shocked today to the reaction of the financial markets. I was not shocked. As I have stated previously, the value of equities is not determined by the capital market, but rather by profits. There is broad consensus now that the United States will suffer a recession. That belief has lead to the downgrading of earnings potential by most analysts of US firms. Consumer spending makes up a significant portion of the US economy (about half). Drops in consumer spending have direct negative impacts on GDP. Combine this with the fact that businesses in the US are still unable to obtain credit (regardless of creditworthiness or risk) for expansion, and that consumers are finding it increasingly difficult to finance purchases, and the outlook remains grim.

That is why the market continues to tumble - at least in terms of fundamentals. That analysis, however, does not entirely explain the panic we are seeing on Wall Street.

While this is antecdotal, here are my thoughts as to why and what is driving this bearish stampede to bonds and precious metals. More and more Americans have their retirement futures tied to private investments. For much of the past decade, equities demanded the lion’s share of that investment money. Most people who invest their savings do a rather poor job of it. They don’t manage their portfolios. They don’t look at their risk allocations. They look at, by and large, only the upside of investments and not the downside. Most importantly, most investors don’t think about their time horizon and their ability to accept risk during that time period.

The United States has an increasing generation of baby boomers who will continue to retire over the next decade. A good number of those retirees will retire in the next five years. While many of them should have limited exposure to the stock market, I suspect many heeded that advice as the equities markets provided the best returns on invested capital. That investment return has a price, and that price is market risk.

In the past two weeks, the market has bounced up and down violently. Down 800 points one day, up 200 the next, down 400 the next, up 400 the next, down 300, then up 200, and so forth. In this period of market flux, individuals who rely on their investments for retirement, panicked. Worried that they would be wiped out, I believe many investors decided that the last 10 days have been too much for them, and they bailed out significant portions of their portfolio and moved them into treasury securities or other govenrment securities. The result of this mass hysteria has driven the yeilds on treasury securities to effectively zero, and nominal interest payments of bonds are the lowest I have ever witnessed. Retirees - worried their nest egg will evaporate into nothing - brough their nightmare to fruition in panicked selling. The panic will continue for some time as the devaluation cycle will need some time to wear itself out. The Dow could still hit 9000 - as worried investors run from equities until they can assess the full extent of the damage and risk.

The second factor that people need to understand is - the $350B that the US government has committed to use to buy crappy paper from Wall Street won’t actually ‘hit the street’ for quite some time. This means that many banks are still struggling to meet their cash requirements and investors in those banks continue to be nervous regarding the overall safety and soundness of the institutions and their investment portfolios. Until Uncle Sam actually starts BUYING paper - the $350B we taxpayers committed to the “bail out” won’t provide Wall Street much solace.

And again, there is considerable evidence to suggest that Wall Street may not take kindly to being frogmarched in front of Congress and being pelted with “how much money Mr. CEO did you  make” as Richard Fuld had to endure today from the likes of Rep. Henry Waxman.

Waxman asked Fuld if it was true he made between $400 and $500 million running the company since 2000, referencing Fuld’s vacation homes in Florida and his impressive art collection.

Lehman Brothers filed for bankruptcy last month.

“You did well when the company did well and you did well when the company did poorly,” said Waxman.

“Is that fair?”

Fuld should have replied, Jack Nicholson ranting style, by saying, “Your goddamn right it’s fair! Up until you jackasses destroyed the market with all your dallying around, and letting Lehman twist on the vine, while saving your own skins by taking over Fannie, Freddie, and AIG, I earned profits for my shareholders and was completely accountable to them. I earned every goddamn cent of the half a billion dollars I was paid, because I made trillions of dollars for my investors. In the end, panic and stupidity killed Lehman, not our business management. When the typhoon of panic you jackasses caused this market hit - it didn’t matter how big Lehman’s boat was - the ocean always wins.”

Alas, Mr. Fuld didn’t say that - and got into a fight with Mr. Waxman about the technical details of his compensation.

But I will tell you that EVERY wall street executive watched that testimony and will be thinking twice about asking Uncle Sam for a single penny. Fuld got BBQ’ed and the bottom line is, Lehman died because no one wanted to step in and provide him liquidity at the most desperate hour for Lehman; not Uncle Sam, not the Fed, and not other banks. Barclays and BoA both determined it was better to let Lehman go broke and buy the assets afterward than to try and save the enterprise. I can’t blame them - the panic on Lehman was so severe, nothing short of a miracle or a government take over would have stopped it.

Thus, now begins the Potomac Two-step of blame, shame, and class warfare. As if we don’t all have enough troubles, now we have to endure the sanctimonious nonsense of the likes of Waxman, Dodd, Schumer, and Frank. All of whom have pledged to look into “what caused this crisis.”

I tell you what - give me 10 million dollars and I’ll save the taxpayers ten times that. YOU DID. You caused the crisis by expanding the lending of Fannie and Freddie to deadbeat borrowers who had no business being the market. YOU DID. By chastising the regulator, OFHEO in 2003, who tried to warn the Congress that by expanding the sub-prime market we could jeopardize the whole financial system. YOU DID. By refusing to acknowledge there was a problem in lending, instead, chastising republicans on the virtues of giving deadbeat democrats (and republicans no doubt) money to buy houses and then letting Fannie and Freddie package that paper as if it was class AAA debt, instead of the junk bonds it actually was. YOU DID. By making spurious statements about IndyMac. YOU DID. By making nebulous claims of insurance companies about to fail. YOU DID, Congress - YOU DID THIS TO THE AMERICAN PEOPLE.

That bad debt is so entangled throughout the financial markets - when it tumbled - the system that was created ensured panic. It is amazing that more banks haven’t gone under. And to “save us” from this mess, Congress has created a fund that no sane Wall Street firm would dare bargain with - they’d rather fling themselves out windows (something difficult with drop in glazing).

So in response to this big question that Congress has about who’s to blame… and who caused this mess.

YOU DID, Congressman Waxman. YOU DID, Senators Shumer. YOU DID, Senator Dodd. YOU DID, Congressman Frank. You want to know why this is all messed up and Lehman went broke - YOU caused the mess.

And to make it all better - YOU all decided that the best course of action was to put the taxpayer on the hook for your mistakes. Well - I guess we’ll know if that plan worked in about three months. My guess is it won’t have mattered… Wall Street will have healed itself by then. And the Fed will continue to pump in cash to ensure that we don’t have an entire collapse of the US banking system. By the time Paulson get’s the TARP up - the crisis will be long over.

Again, thanks to the stupidity of the ‘oversight’ YOU demanded to ensure that the toxic paper YOU demanded banks issue got swept under the rug. YOU have ensured the $350B provides no real liquidity to banks when they need it most.

By the way - if you decide to make good on my offer, I will take only Gold now please. At current spot, 10M in gold is about 12000 ounces. I take gold eagles without any difficulty. Have the West Point Mint representative contact me for delivery.

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