Monday, August 13, 2007

It's worse than you think...

Today's headline was inspired by some weekend and Monday morning reading.

The US equity markets, battered and bruised by fears of an underlying credit catastrophe, are in worse shape than most average investors - and even some experts - would like to believe.

After last week's rescue by the Federal Reserve, which injected $38 billion into the markets, word came to our shores that on Monday, the Fed was injecting another $2 billion on top of $5 billion shoved in by the Bank of Japan and the European Central Bank's "loan" of $65.3 billion. Over the last week of trading the ECB has added more than $200 billion. Since Thursday, the Fed has added $62 billion in liquidity. That's a lot of liquidity, yet it was only enough to lift the markets temporarily on Monday.

Dow 13,236.53 -3.01; NASDAQ 2,542.24 -2.65; S&P 500 1,452.92 -0.72; NYSE Composite 9,428.86 -6.18

We're in dire straits and headed for a crash of magnificent proportions. The BofJ and ECB are helping out because they have a vested interest in keeping the US economy afloat. Many of their wealthiest citizens are heavily invested in US stocks. Further, a crash of the US economy - which is, after all, a near certainty, since we've gone from being the world's largest creditor nation to the world's greatest debtor nation in a matter of just 50 years - would have a ripple effect so pronounced that if would take down most other markets with it.

So, the world economy is on the brink, and we're getting billions in financial aid from around the world. Anybody - and I mean ANYBODY - who is even considering investing in stocks at this juncture ought to be institutionalized. This is the most dangerous market situation since the 1929 crash, and nothing short of an economic miracle is going to prevent a serious, damaging, long-term, worldwide meltdown.

The multiple cash infusions by world banking interests are desperate gambits. By becoming the buyers of last resort, central banks are literally taking the place of real, live investors, those same people who are exiting the market at a speedy pace. All the cash infusions do is shore up stocks for the near term, allowing larger brokerages and mutual funds to exit as quietly as possible, with minor losses rather than huge ones.

In the end - and mind you, I'm no expert on global financial transactions - the central banks will be stuck with stocks that were purchased at significant premiums. Weeks and months from now, these "repo" purchases will look as foolhardy as a horse racing plunger's last bet on an aging and feeble nag.

The underlying problem is that the money being spent to buy these stocks is generally that of governments, or in other words, our tax dollars at work. Since we don't get to vote on how our money is spent, this exercise in futility is just another in a long series of bad spending examples by derelict national governments, which are really nothing more than massive criminal conspiracies, disigned to keep the lower and middle clasess in a condition of near slavery and relative poverty.

When the central banks get around to selling these stocks at 20, 30, 40% losses or better, the citizenry will get the bill in the form of massive tax increases, depleted services and general unaccountability by those supposedly in charge. It's a swindle of the highest, most despicable order.

We should be used to it.
Substantial Wealth and Riches Creation
The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
It's been going on for years. The final outcome will be massive disruptions to financial systems world-wide, a lower standard of living for nearly everyone, bankruptcies at an all time high, pension fund defaults, and misery all around.

We can thank our leaders and the heads of state-run banks for what they will have wrought, most notably, Sir Alan Greenspan (he was knighted by Queen Elizabeth II in 2002), whose sloppy handling of the economy and penchant for loose monetary policies produced the series of bubbles - first the dotcom debacle, then commodities and finally the housing blow up - that led to this eventuality.

The rich will surely get richer by comparison. Many are already heavily invested in gold and other, more stable currencies than the greenback. The little guy, 20% of whom will find themselves out of work within the next two years, will be forced into a world of lowered expectations and general despair.


The market internals were suitably mixed. with declining issues beating out advancers barely. There were 346 new lows, but a paltry 73 new highs.

Oil was up marginally, while gold and silver were lower by negligible amounts. With so much uncertainty, inertia is beginning to set in everywhere. Volume on the equity markets was normal, but well below levels of last week.

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