Another week, another pummelling. The S&P dropped nearly 7% for the week with heavy volume on Friday. It was 'options expirations Friday' so the heavy volume was expected. Also, the Dow was plunging over 200 down when out of the blue right after lunch, it came back to even. It then lost 100 to finish the day. Other than options Friday, to what could we contribute the down week and volatility? Obama signed into to law another 'stimulus package' that digs our debt grave deeper. But we all knew this stupidity would resume. Clearly, the market gave the stimulus a thumbs down.
More importantly, the market pitched and swayed all week with the talk of bank nationalization. Clearly, we have become a nation of whiners and quitters and have willingly surrendered our capitalism and Constitution to the banker rulers that promote the bailouts. There is very little fight in America partly because American citizens are profoundly ignorant of all things economic. Our Congress and House remains dumb and dumbfounded and with each jag down on the Dow, willingly sign away our country and its future. This is why I write. Wake up, America!
Germany passed legislation allowing them to nationalize their banks. It's all over the world. The banking system is collapsing. Or is it? The CEO of our largest bank, Bank of America, says that his bank is just fine. It does not need a bailout. Well, other than the one he was begging for last week to facilitate the digestion of Merrill Lynch. But let's just assume that Mr. Lewis is telling the truth. BofA is sound and healthy. Then why all the 'nationalization' talk? Why does the government keep the subject alive? Why don't they back off, shut up, and leave the bank alone? Maybe this is part of the master plan. Maybe the government wants to own all the banks. Maybe governments all over the world swoop in, take the banks, and then unify under a central bank. It is a disgusting thought but something is not right here.
All this leaves the stock market in a flighty mood. The Dow has lost the critical 8200 - 7500 range as we end the week at 7365. I would expect the downtrend to continue next week. Economic conditions continue to decline. Washington continues to display a complete ignorance of the country that they represent. I watched Barney Frank conduct the inquiry of the bank CEOs and I actually wanted to vomit. He was twirling his gavel around holding the mallet end and pointing the handle at his co-horts. He was content and smug. And why shouldn't he be? He gets a salary for life - on us. He gets the best health care on the planet - on us. He has job security - on us. He makes big bucks - on us. He is like all of our representatives that we waste good time casting votes for in November. Non of them understand or care that America is hurting.
Let me leave you with this idea. If you had money to lend, wouldn't you raise your interest rates as your supply of capital shrank? That's called 'supply and demand'. As your rates would rise, demand would diminish. That process keeps everything in balance. Doesn't the government claim that 'lending has seized up'? Then, shouldn't interest rates be much higher? If this makes sense, then why has our Federal Reserve done exactly the opposite? They have lowered rates to zero. Doesn't this promote speculation and reward foolish lending? How did we get in the current predicament? Yep, speculation and foolish lending. Capitalism is a beautiful thing but you have to let it work. Our current government has no intention of doing so. I suspect they will nationalize our banks in the coming weeks and I suspect the Dow will gash the 6000 mark before the 'stimulus' package gets unwrapped.