Laughing at our mistakes can lengthen our own life; however, laughing at someone else’s can shorten it! … Cullen Hightower
In a grim final speech as Kansas City Fed President, Thomas Hoenig said that he expects U.S. economic growth to lag behind historical norms for generations, and that Fed policy has done more harm than good: "When you encourage consumption by inhibiting your interest rates from rising to their equilibrium level, you will in fact buy problems, and we have in fact bought problems."
Wow, now there's something you will rarely hear – a Fed head telling us that we're going to be slugging it out for years on end and that their path was a mistake. But of course - he's retiring and no longer a part of the decision process at the Fed, and therefore no more backlash from The Ben Bernanke. Thomas Hoenig realizes that this recession, this debt load, this nightmare cannot be fixed using monetary policy. But meanwhile, the US economy has been slowly and deliberately eroded by inflation, falling wages, lower paying jobs, and more ridiculous regulations. Can we fix the economy – of course – but it would mean short term pain for some, because it would mean disbanding hundreds of government programs that hinder real growth, and then we’d have to take control of our money back from the Banksters. Remember when we had the single greatest economy on earth. If a child was failing in school, he was held back and made to study. Today the reading scores for high school seniors have hit the lowest level ever recorded. If we compare various elements over the past 20 years or so:
Ex #1: Johnny and Mark get into a fistfight after school.
20 Yrs Ago: A crowd gathers. Mark wins. Johnny and Mark shake hands and end up buddies.
Now: Police called. Johnny and Mark are charged with assault, and both are expelled even though Johnny started it.
Ex #2: Jeffrey ‘fidgets’ in class, and disrupts other students.
20 Yrs Ago: Jeffrey sent to the Principal, given a paddling, returns to class, stays still and doesn’t disrupt class again.
Now: Jeffrey given drugs, and the school gets extra money because Jeffrey has a disability.
Ex #3: Billy breaks his neighbor’s car window – Dad paddles Billy.
20 Yrs Ago: Billy is more careful next time, grows up normally, goes to college, and becomes a successful businessman.
Now: Billy's dad is arrested for child abuse. Billy is remanded to foster care and joins a gang.
Ex #4: Mark gets a headache and takes some aspirin at school.
20 Yrs Ago: Mark offers an aspirin to someone who also has a headache at school.
Now: Police called, and Mark is expelled from school for drug violations.
Ex #5: Pedro fails high school English.
20 Yrs Ago: Pedro goes to summer school, passes English, and goes to college.
Now: ACLU files class action lawsuit against the school system and the English teacher. English is banned from the core curriculum. Pedro ends up unemployed because he cannot speak English.
Ex #6: Johnny takes leftover firecrackers and blows up a red ant bed.
20 Yrs Ago: Ants die.
Now: Johnny charged with domestic terrorism. Johnny's Dad goes on a terror watch list and is never allowed to fly again.
Ex #7: Johnny falls while running during recess and scrapes his knee. He is found crying by his teacher, who hugs and comforts him.
20 Yrs Ago: In a short time, Johnny feels better and goes on playing.
Now: Mary is accused of being a sexual predator and loses her job.
Many of the companies that you buy stock in were first created in someone's kitchen, basement or garage. Because they were so good they grew, necessitating a move into a true factory, employing thousands. Now, you’d be arrested because that ‘garage’ would have to acquire "commercial" business permits that do little more than dissuade innovation. But no politician is going to stand up and tell the American public that to be great again, we need to go back and disband the EPA! Since the EPA showed up – we have lost over 50 Million high-paying jobs. Honestly, if TARP didn’t create jobs, and if QE1 and QE2 didn’t create jobs – why do we really think that pushing trillions more stimulus into the economy will have any effect?
It’s been another roller coaster week. We saw the market gain 300 points on Tuesday, only to lose more than half. We saw the market up 117 Wednesday, only to end the day down by 179 points. We saw Thursday gain us 255 points by mid day, and tumble all the way down to DOW -41 by 3PM, and then rally all the way back to + 143 points end of day. Welcome to the world of high frequency trading.
So will the market roar higher or roll over? I can honestly make both cases, but here's something to consider. As you can figure out, all the schemes they're cooking up in Europe are 1 - not working, and 2 - probably not able to be implemented. So, we could be facing a Greek default any day. And if that were to happen, I suspect the immediate reaction would not be a good one.
I'm hearing that Germany has already begun printing Deutsche Marks. I can't confirm that, but there are more rumors swirling around Germany announcing that they want out of this ‘Euro’ thing. What happens if that announcement is made? A cascade of crazy things (and none of them are good) will happen – at least in the short term. But on the other hand, we could very likely see The Ben Bernanke come out of left field with a whole new round of stimulus on any particular day. So, with all those plates spinning in the air, to make any real predictions right now is silly. I feel the market wants to fade off and fade off hard, but if a few trillion in stimulus were announced they'd start to ignore all bad news and push us higher, because they can.
I've been carrying some short positions all week, and although there were times when they were not profitable, we ended the week in positive territory. I tend to think that we'll see more downside until The Ben Bernanke comes out with some form of stimulus pump. The issue of course is that it will happen after hours, and we'll gap up 300 points that day.
The bottom line is that we're mired in a horrible situation that really cannot be resolved without pain of some form. Therefore, you need to remain pretty cautious. One thing I feel strongly about is that whatever the course of action that they try, it's going to involve printing money, money that the world doesn't need to have pushed onto it. Gold and silver will naturally react to the upside. The recent bear raids on Gold and silver frightened a lot of folks, but for me, it was simply a buying opportunity at discount prices. ‘The Talking Heads’ say that the gold run is finished, but they said the same thing with gold at $500, $750 and $1,000. While funds have lost investors 28% this year - Gold is up on the year!
This week I purchased more DOG, SH, GLD, SLV, and purchased more physical gold and silver as well.
I have DOG, SH, GLD, SLV in my short term holds, along with some Oct DIA 110 put options at 2.80 per share.
I am not going to put a stop on these, and still looking to add to physical metals on their down days. This trade isn't for the weak of heart.
Please be safe out there!
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