Thursday, 05 March 2009

• Truth in Advertising

  Warning: This post is negative. You may not want to read past this point.

  Today the markets are taking out multi year lows. Citigroup is trading under $1 per share, GE has been crushed, and so on. The amount of wealth destruction in the past few months has been horrifyingly astonishing.

  In the face of the worst recession we have faced since the great depression, this administration has proposed a 3.6 TRILLION dollar budget, increases taxes and essentially wages war on capitalism. Of that there is no doubt. The markets know this and have reacted accordingly. Risk capital has been declared enemy number one, so it is going into hiding.

  Even a novice student of the depression would know these are the exact wrong things to do. Jim Cramer ("Mad Money") a liberal democrat who supported Obama, has gone ballistic. He'd be fun to watch if it weren't so sad. Retirees have lost half or more of their retirement savings. Since January the markets are down over 25% and seem to be headed much lower. Of great concern are the pension funds. They have have lost huge sums of money putting their future obligations at serious risk.

  While campaigning Obama promised to end business as usual in Washington. He said he would not sign a bill that had "earmarks" in it....those pet pork projects that add billions in additional wasteful spending to a bill. This bill he just signed, however, has no less than 9000 earmarks in it. Yep. Nine Thousand. Add that to a 3.6 trillion budget and the trillion dollar pork laden stimulus bill, and you begin to see why the markets are in meltdown mode.

  How can that be taken as anything less than a lie...a breach of trust, a broken promise? There was a terrific opportunity to send that bill back and say something like this..."I promised the American people we were going to stop doing business as usual. I promised not to sign a bill with earmarks. At time like this, we cannot afford to waste a dime of taxpayers hard earned money. So I am sending this bill back to congress and telling them not to bother sending it back unless these earmarks are taken out. We must get serious about fiscal responsibility. And until we do the American people are not going to believe us. So clean up this bill and lets do what is right and keep our promises. " Had he had the courage to do something like that, the markets would have responded with a resounding hoorah.

  A few more days of markets like this and Cramer is going to seem tame. You've heard the expression "Follow the Money"? Its always about money. People are in pain and they are angry.  I just got back from a luncheon where I am sure 90% of the attendees voted for Obama. They have buyers remorse. Even I was surprised at the language I was hearing.

  Frankly, while I am diligently trying to keep my head up, I am disheartened. I am praying that we do not fall into a full fledged depression.

  I should note that my dispirited comments may actually be a good sign. One of the things that happens before a reversal is "capitulation" when you finally reach your "throw in towel" limits. I am pretty close to there.

  Update: I strongly encourage you to watch this video.

   

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