Wednesday, March 19, 2008

Up 400, down 250

How many times have we seen this in the past 6 months?

Step 1. Fed lowers rate.
Step 2. Suckers rally occurs with Dow/s&p rising by 2, 3 or even 4%.
Step 3. So-called experts on CNBC declare worst is over, now is the time to buy.
Step 4. MSM goes nutty telling everyone how awesome Benny B is for saving the day.
Step 5. Day after 1/2 of the rally fizzles away.
Step 6. Day after the day after the other 1/2 of the rally fizzles away.
Step 7. Week after the Dow is down 3% lower than when Step 1 started.
Step 8. Oil is $20 higher than than Step 1, dollar is 10% lower than Step 1.
Step 9. Go to Step 1, rinse and repeat.

Benny B is one or two cuts away from 0% rates. Then what do you do? Negative interest rates I guess. It has happened before. In the 70s Switzerland had a negative rate for a brief time. When that doesn't work, why not make it illegal to save. Anyone with a balance of more than $500 in a checking/savings account will be forced to go out and spend or face jail time. Sounds ludicrous right? Well it sounded pretty ludicrous for the federal government to confiscate gold from its citizens too. Yet that is what FDR did in the 1930s...not that you would ever heard about that in the gubermint skools that teach us FDR saved us from the great depression when in reality FDR took a 2 year recession and turned it into a 10 year depression. But why quibble with facts?

Point is the same kind of idiotic programs that were tried in the 30s are being tried now. Fiscal stimulus. A war on savers. And what is coming, yet nobody is mentioning is mucho protectionism as soon as Billabama takes power. Listen to the rhetoric of 2008 Democrats and it sounds like 1930 rhetoric preceding the Smoot-Hawley act. Scary shit indeed.

1 comment:

Malcolm said...

You’re right, of course.

I’ve even gone as far as suggest that whenever Uncle Ben’s shows up in front of a TV camera, the market tanks.

I had a little fun with this theory last Friday. As CNBC was doing a ‘live shot’, Ben walked by the screen in the background and the market, of course, reacted badly.