Friday, September 26, 2008

Dow Ends Higher; What Happened to the Crisis?

Well, the markets gave us all the answer we were seeking. There really wasn't a "severe financial crisis" such as was being peddled by Henry Paulson and the Bush administration. It was all scare tactics designed to steal $700 billion dollars from US taxpayers and give the Treasury Secretary unimpeachable powers.

They failed. Miserably.

The Dow finished up 118 points on Friday and is up a very healthy 550 points since the low last Wednesday of 10,609. Wasn't it supposed to crash? My point exactly. This whole sordid affair is a massive fraud perpetrated by the White House and Treasury. There's no chance of passage by congress of anything even remotely resembling Paulson's original 3-page draft proposal.

Wall Street, at this point, doesn't really care. They seem to have matters under control. The media, however, are very confused. While many outlets are saying that McCain blew up the meeting at the White House, some right-wing radio hosts, especially Rush Limbaugh, are blaming Obama for killing the deal.

The NY Times provides some background to suggest that neither had much to do with killing the proposal.

Whatever the case, the White House was generally thwarted by rank-and-file Republicans in the House and Democrats in both houses. By doing nothing, so far, congress has saved us $700 billion. Paulson's plan was panned by Senator Richard Shelby and 200 economists as unworkable.

If the US economy was in serious circumstances, we could surely count on the current cast running the federal government to make a mess of it by playing politics, as they do, all the time, non-stop.

The blame for this one, though, falls surely on the Republicans, specifically the White House, for proposing the bailout to being with.

There may be a deal tonight, tomorrow, Sunday, Monday or never. At some point all of the congresspeople will want to get out of town and back to their districts and states for a recess until the election. Many are in tight races which could help explain the Republican motives at the start. By keeping incumbents in D.C., the challengers of many first-term Democrats would have an edge.

That doesn't seem to have worked out, however. Congress will recess sometime next week, if not over the weekend. There's no crisis and no need to rush any legislation. Both the congress and president will be lame ducks in less than 40 days. It's time for them to go home.

Dow 11,143.13 +121.07; NASDAQ 2,183.34 -3.23; S&P 500 1,213.27 +4.09; NYSE Composite 7,890.46 -37.41

On the day, though, the indices were split, decliners were far ahead of advancing issues, 3977-2362. The Dow, in particular, was aided by AIG being replaced with Kraft (KFT). New lows soared beyond new highs, 484-20.

There's obviously still considerable weakness in the markets, but nothing of the scale the public has been told. Further declines are ahead, maybe on the order of 10-20%, and we're in a slight recession which is likely to get worse before it gets better.

The upshot of all this malaise and confusion is that Main Street is one heck of a lot healthier than Wall Street. Small business should thrive over the coming months and years. Stocks may be under pressure for some time to come.

Oil slipped $1.13, closing at $106.89. Gold gained $6.50, to $888.50. Silver ended at $13.50, up 23 cents.

Volume was moderate to light, very un-crash-like.

NYSE Volume 1,169,676,000
NASDAQ Volume 1,986,540,000

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