The Ticker

With the Dow reaching the 10K plateau yesterday, where do the experts stand? Most will tell you 10,000 is just a round number that's easy to single out. U.S. News caught up with two economists, both just as optimistic about the Dow's potential as they were almost a month ago.

Jeffrey Saut of Raymond James & Associates points to recent earnings announcements and says they came as no surprise to him. JPMorgan Chase was the first banking giant to release its monster earnings yesterday, and today Goldman Sachs has followed suit with earnings tripling since the days of the financial panic, according to the AP.

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Many experts see the Dow breaking the 10,000 mark in the coming days or weeks. When the index passes that milestone, will it be a psychological victory or an actual indicator of real change in the markets?

In her most recent bulletin in late August, analyst Amanda Crumb of Birinyi Associates says the Dow will see 10,000 any day now. She believes the five-digit number will lift the spirits of some investors who have been afraid to reinvest in the markets. Says Crumb: "The stocks have been gaining for a while, and the stock market is telling you that the recession is over. . . . People aren't giving the market enough credit right now. It's strong."

U.S. News also caught up with two economists whose bold predictions a few months ago don't seem so outrageous anymore.

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A cap-and-trade plan to combat climate change gets a bit closer to reality today as the American Clean Energy and Security Act of 2009, a 1,200-page bill requiring the U.S. to cut reduce greenhouse gas emissions by 17% from 2005 levels by 2020 and about 80% by the next century looks set to pass the House. Ahead of a final vote, analysts are weighing in on what it could mean for companies and investors.

Mostly bad things, it turns out.

Paul McWilliams at Next Inning Technology Research says cap-and-trade simply opens the door for corruption:

There are many easy, painless and even economically positive ways we can encourage reduced CO2 emissions and the development of new technologies that will reduce our dependence on foreign oil, which is what is implied by the "security" part of the title. However, this bill will not accomplish these goals. What this bill will accomplish is a mechanism for massive corruption, the strengthening of the power of congressional incumbency, the establishment of a full employment act for lawyers and the debasement of the aggregate U.S. economy. Yes, those are bold words, but I can back them up.

If this bill passes, Congress will have the power to decide who gets to release CO2, how much they will get to release, how much they will have to pay if they want to release more than the congressional dictated allocation and who they must pay. Because nearly everything we do from raising cattle to growing crops to powering our electric grid to manufacturing everything we eat, wear and use emits CO2, the implication is Congress will have absolute control over not just our economy as a whole, but also in naming the winners and losers.

Make no mistake; what our Congress is trying to do is give itself the ultimate and nearly infinite power to selectively un-tax without the annoying encumbrances or inconveniences of due process. Congress knows that if it is successful in this ruse, it will have industry cowering at its feet to beg for just one more bowl of CO2 credits and, with that, all the campaign contributions and perks you would expect to change hands when favors are denominated in tens or, in some cases, hundreds of billions of dollars.

The tone is dire, but it's tough to disagree. By its nature, any carbon credit scheme mean doling out large-scale, arbitrary costs to companies that pollute. There's just no getting around it, and the temptation to play politics with how those credits are allocated will be great. (I'll admit I'm not informed enough on the bill to parse whether safeguards are adequate here).

So who will the winners and losers be if the bill becomes law? The IRRC Institute breaks it down for the S&P 500. Unsurprisingly, big polluters in the utilities, oil and gas, industrials and basic resources sectors fare worst.

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Just a quick bit from this WSJ story on Greenlight Capital's David Einhorn. If you'll remember, Einhorn is the poker-playing, short-selling hedge funder who famously called the demise of Lehman Bros. Looks like he got burned along with lots of other shorts in the now-infamous Volkswagen short squeeze late last year. But at least Greenlight gets credit for some dry wit.

From the WSJ:

Hedge-fund manager David Einhorn (left), of New York’s Greenlight Capital, in a recent investor letter listed in a table the internal rate of return of 14 positions he closed in the first quarter. A bearish bet on jewelry retailer Zale generated a return of 92% and another on U.S. Bancorp returned 78%, Greenlight said in the May 1 letter. Then there were investments in companies such as Dr Pepper Snapple Group and Aldar Properties that generated losses of 46% and 91%, respectively, it continued.

But for the by now infamous Volkswagen trade, which dealt a punishing blow to hedge-fund managers around the world last year, Greenlight didn’t list a figure. It simply said, “bad.”

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