Wednesday, September 12, 2007

No Truth and Fewer Consequences

The markets bounced around the flatline in a day which ended up being of little real consequence.

Dow 13,291.65 -16.74; NASDAQ 2,592.07 -5.40; S&P 500 1,471.56 +0.07; NYSE Composite 9,598.73 +1.12

Losing issues outnumbered winners by a 4-3 margin and new lows defeated new highs, 201-158. The song remains the same. The markets are weak and the trend is lower.

The real action was away from Wall Street, in the oil bourses and at various press conferences. First, oil jumped another $1.68 to $79.91 on - the usual suspect - supply concerns. It's gotten to be such a ridiculous song and dance that there really doesn't need to be a reason, only knowledge that the price is higher.

Oil companies are raking in obscene profits, sheiks and sultans are rolling in cash and the US dollar is crumbling. Without any semblance of leadership in Washington, consumers in the US, and to a degree, around the world, are being raped by higher prices for gas, home heating fuel, jet fuel and just about anything else that involves petroleum. It's a death spin of global magnitude which will eventually price everyone out and send economies everywhere into dizzying tailspins.

Couple high prices with the strained credit markets - now being soothed by Fed-speak and talks between Treasury Secretary Hank Paulson and heads of beleaguered finance companies such as Countrywide Financial - and you have a strangulation effect on the middle class and a morass at the center of global finance.

The remaining mortgage financiers are going to be bailed out by the government, as are a slew of undeserving homeowners who got into bad deals with no money down and could as well understand the terms of their loans as practice brain surgery. For those who have already hit the skids, too bad. It's a horrid solution to a real problem and quite unfair to many parties. One speculator was heard saying, "we have free markets only until there's a problem that needs the government."

Therein lies the rub. The real bailout is for banks, mortgage firms and credit card issuers. Homeowners and consumers will still be on the hook, only for a longer period and at a slightly lower interest rate. It's oligarchy at the extreme.

Gold and silver took a breather, both registering marginal losses. With the Yom Kippur holiday beginning, the next three trading days - through Monday - will experience a slowdown of activity.

Stay tuned. There are fireworks yet to come. The credit crisis hasn't fully blown out and oil prices haven't yet stopped rising. The world needs a savior. Is there one out there?

No comments: