Tuesday, February 27, 2007

Sensational! Spectacular! WOW!

Finally, something to get excited about.

In case you missed it, US stock markets nearly collapsed wholesale on Tuesday.

Check out these figures:
Dow: 12,216.24, -416.02; NASDAQ: 2,407.86, -96.66; S&P 500: 1,399.04, -50.33

Like I said in the headline, WOW! But it wasn't as though we weren't warned. Just yesterday, right here, my headline read The Correction Has Begun. If my word wasn't enough of a warning to start taking those profits and paring losses, then maybe former Fed Chairman Alan Greenspan's remarks to an economic conference in Hong Kong yesterday might have given us a clue that something was in the works.

And boy was it. This was telegraphed like a club boxer's left hook.

The fact of the matter is that today's response from, first, the Chinese stock market, then Europe's markets, and finally the US markets, was entirely well-organized and a classic prototype of blatant manipulation.

In the long run, it means little. The biggest hit in the US, on a percentage basis, was taken by the NASDAQ, which lost nearly 4% on the day. We'll survive. That stunner was, however, dwarfed by China's 9% decline, which, according to the so-called experts, was the real reason for US stocks to take a beating.

What utter hooey! If the Chinese economy stutters and stumbles, we should, as a nation, applaud long and loud. Maybe we can get a better deal on plasma TVs if they feel a little pain for a change. We're all in it together, though the US trade deficit and government overspending does play into the whole mess.

Our loose fiscal policies are the prime factors behind the whole worldwide bubble economy and we're mortgaged to the hilt. But if China takes a hit, should we worry? Maybe a little, since they hold our debt and could start calling it in or floating their currency - the yuan - a little higher, or both. But it certainly isn't the end of the world and nothing's really changed since yesterday, right?

Oh, no. That's where you would be wrong. This story by Seymour Hersh in the New Yorker makes some very poignant and troubling claims about the state and nature and inner doings of our political leadership. I won't tip it off here, but leave it to you to read it for yourself.

Well, here's a clue. Hersh is the preeminent investigative reporter of our day. He broke the Iran-Contra story and he's been on to the shenanigans of the Bush administration from the start of the Iraq War. So, would the hoi poloi in the White House and on Wall Street and in London's City get a little bit twitchy if the leaders of the world's superpower were about to get a serious spanking by the media and maybe the Congress?

Here's the timeline:
Hersh's article hits the newsstands and the web on 2/25.
Greenspan warns of a US recession on 2/26.
China's markets implode, Europe and US markets follow on 2/27.

Welcome to the winter of our discontent. My advice: Watch for falling stocks... and politicians. Yesterday, I said the Dow should settle out in the 10,350 to 11,100 range. We've still got at least another 1100 points to go.

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