I think Butch has some good insights.
Why are we paying companies moneys (bailouts to GM and Chrysler(a private company) to continue to produce vehicles that no one is buying?
Come on! Let's get real. This sort of behaviour by govts can not last without reducing the people's standard of living.
However, we need to note that it does enrich certain businesses, business leaders and govt officals.
So there are some very powerful influences to manage the the economy, which I say is not for the great good, not for the people, but only for those that control. And in the process, hurts the people.
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It was another week full of news items, and many had a definitive effect on the stock markets. First was Presidents Obama's tax cuts, $400 for individuals and $800 for couples. Supposedly we will "feel the effects" of these cuts by April 1. That may be, but the markets and I most definitely have doubts. The average family in the US will have $13 a week more in their pay checks in 2009 and less than $8 in 2010. Hard to find that very stimulating. It's "Burger King" money!! "Chump Change", and hardly stimulating.
Then President Obama's Auto Industry Task Force basically said the industry needs an overhaul. That is just not news!! The real question is how much money is this Administration willing to continue to give GM and Chrysler and for how long, and what terms and at what price now and at what price later. We don't know the answer to that yet. And the markets do not like conjecture for very long. Rumors are fine though!! This is no longer a rumor, this is trouble down the road.
Then we had a ton of news regarding the banks, and how much money we might be willing to hand over to them. I do believe all this talk is meant to put some stability in the stock markets, particularly the financial sector. But it's still a nothing plan. It's not even vague at this point, it is simply a lot of talk. Even the so called "Stress Test" for banks is vague and ambiguous. Discussion about how it works.....I have no clue yet. Terms like "extra cushions", "well capitalized", and "consistent, forward looking and conservative." What the heck does any of this mean?? We, as a nation, are buying stock in banks, and I think we as taxpayers now own some 36% to 40% of Citibank. The fear in the markets is "nationalization" of these banks. Treasury says no, the Fed says no way, the White House isn't considering this as an option. But that seems to me to be exactly where we are headed. And the markets do not like that idea. But I honestly believe it's the only option open to the Treasury and Fed to keep a lid on just how much money is "debt" or "toxic waste" in these banks. Anyway I look at it, it's a bad deal.
And hidden away in the 1071 pages of "stimulus" is a $4 billion plan for the Department of Housing and Urban Development to give grants to all 50 states to be divided up by different cities to buy foreclosed homes. But again, we have a government equation as to how the money is given out. California has twice as many foreclosures as Florida, but will get the same amount of money, about $500 million. It will help local communities for sure, but it's just not enough money to amount to anything substantial. On the other hand, Vermont will be getting $20 million, but claims only 150 foreclosed homes in the entire State. None of it makes sense. It all makes good headlines, but when the numbers get crunched, nothing makes sense. If this is any indication of how the stimulus is going to work, we are in serious trouble. We are anyway.
Bernanke boosted things a little with his statements that banks would not be nationalized. But it was short lived. But Bernanke has been making statements regarding this economy and banking issues and money for 2 years, and very little of what he has to project comes to be reality. So the boost he gave the markets just didn't last long. Lifting my spirits is ok, but if I can't make money, my spirits don't remain lifted for long!!
President Obama promised the nation on Tuesday night that he would lead it from a dire "day of reckoning" to a brighter future, summoning politicians and public alike to shoulder responsibility for hard choices and shared sacrifice. "The time to take charge of our future is here." Nice speech, but just rhetoric. No substance. He claims he is going to stimulate the economy, put up to 4 million people back to work, by spending $787 billion over a 3 or 4 year period. He proposes a budget nearly 4 times that of President Bush's last budget, $1.75 trillion, but he is going to cut the deficit, and cut spending. It is not exactly a contradiction, but there is no plan, no understanding of just how this going to work. All this talk lacks detail, and it may make the average Joe in America a little less worried, but the stock markets are not buying it. To say the very least, his budget proposals are daring and bold. But as long as there are lobbyists, health care is going to stay health care as we know it. He plans to cut Medicare and Medicaid. There are an awful lot of Congressmen and women who are up for re-election. This is not going to be an easy path. He wants to raise taxes on the richest 5% of America. I don't know, but my guess would be those are some of the very people who pay the lobbyists.
I do believe some of this budget will get passed in some fashion. This is a Democratic Congress and a Democratic Administration and a country that is just a little bit anti Republican right now, and holding on to a lot of hope. But the rich don't pay. Middle class America pays. And if they aren't working...good luck. Oh yeah, more bad news on the unemployment line this week too. I made the statement before the elections that Presidents don't make laws, Congress does. Maybe Nancy Pelosi and Senator Reid are going to vote for this type of stuff, but it's going to be a real fight with the rest of our Congressmen and women. And the stock markets are not liking any of it. Hence a close on Friday on the Dow of 7063, and S&P of 735. The Dow was just off it's lows of the week, but the S&P closed at its lows. Question now is can we hold these lows? Or are we going lower? I have to say it, I'm betting we go lower. 6,500 to 6,800 on the Dow. I don't see how we can't go there. But then question #2 is will we hold that? Jury is still out. There is still much of bad news out there people. And there are way too many "zeros" being thrown around.
Butch Cooley Market Comments (Butch is founder of Leg Up House and the Butch Cooley Worldwide Hunting and Fishing . He has been an active trader for decades.)
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