FRANK SMITH
            “MISTAKE” 

I don't know if this is useful to you, but I attended the Summer Conference of the American Correctional Association this past week in Kansas City, as an exhibitor. On Monday, Gen. Richard Myers spoke to us in the General Session. There was an opportunity to ask questions afterward. I stood up first and asked General Myers how we could rationalize spending $12 billion a month on Iraq when U.S. infrastructure was crumbling and how we could rationalize the continued cutbacks in veterans’ health care. Instead of answering, he blathered on about head trauma. The woman behind me said, when he was finished, "He didn't answer your questions." I told her that he had been trained to do so through his whole career.  

After the session, I approached the General directly. He had stated a number of times that the Joint Chiefs and the General Staff were apolitical. I suggested to him that as an Air Force General in making that claim he was ignoring the examples of those such as Curtis LeMay (Buck Turgidson in Dr. Strangelove). Then I asked him if maneuvering an aircraft carrier off San Diego for a Presidential photo-op was something other than "political?" To my surprise and that of the few people standing within earshot nearby, he acknowledged that that was a "mistake" and shouldn't have been allowed. 

HELEN SUTHERLAND
            “FIRE UP” 

Exceptional issue...thanks for all the environmental stories. This one could fire up even the most complacent voter.  

                        GEORGE BROOKS
                        “PERFECT STORM” 

The perfect storm in our financial markets is looming.  The Fed's action Friday was just token, it will take a heroic effort internationally to avert a meltdown of huge magnitude.  Part of the problem is 9,000 hedge funds running $1.6 trillion, not factoring leverage which can be many times that. What's worse, The SEC just eliminated the uptick rule for selling short, making it easier for these giants to sell short. Since their managers take a 20% vig of portfolio profits, you can be sure they will now sell anything profitable and sell short en mass, driving prices down.  Hedge fund trading can account for 50% of NYSE volume on a given day.   

Investors may seize on the Fed's actions and the usual reassuring commentary by government spokesmen and Wall Streeters to run stocks up. That would be an undeserved opportunity for investors to sell out and retreat to the sidelines until the stock and bond market stabilizes. Trading in everything may have to be stopped until some sort of sanity is restored. I am not quick to pile on the bearish wagon when news is already glum, but this can get real ugly. No one has a handle on the leverage amassed in derivatives out there.   

A 1987 crash is a good possibility. If the market knew how bad the situation is, it could find a level, stabilize then work at recovering.  But no one has a true handle on how precarious the situation out there is, and that uncertainty feeds on itself prompting increased selling.  With few buyers, stocks tank.   Only when a cauldron of fear begins to boil do you have a market that is reasonably safe to invest in. That's when the hedge funds cover their short sales and buy-in, thus providing a brilliant opportunity for (guess who ? ) to make billions all over again. This too will happen on Bush's watch.

_____________________________________________