5-4-09

Welcome to Amerika

            Long time readers will know I’m an advocate for letting the market itself tell us what it’s going to do next, especially in confusing times like this. Last week I explained how if the Dow closed above 8131 this week it would be a bullish signal within a longer term bear market.

            The market spoke and did just that. Now, there are no guarantees of course, but, if Dow theory (the most reliable crystal ball I’ve ever known) is correct, this market should work its way higher in the weeks ahead. With a few blips along the way.

            Question: “If all the big money managers know that this is probably just a bear market rally, why would they get suckered in and drive the market up?”

            Because, it’s all politics, and when you’re playing with other peoples’ money it’s a lot easier to be brave! The fact is, no professional can afford to miss a rally- they would just look bad. Greed is a far more powerful emotion than fear.

            The bulls and bears and still fighting it out. What’s interesting about this current situation is that in the face of a lot of bad news, with swine flu thrown in for good measure, this market refuses to go down… FOR NOW. This tells me there is a lot of entrenched optimism and short term, I see the Dow headed up possibly even breaching 10,000 again.

            Question: “Can you make money from this?”

            Well, you could buy stocks of course. Or, you buy the ‘DIAmonds’ through an options broker. BUT, I would be ready to get out fast as it could turn around very quickly.

            Speaking of swine flu…

            Let’s get this in perspective, because in the usual effort to sell their air time, the media certainly aren’t. THOUSANDS of people die every year from regular flu. Swine flu deaths in the USA so far: 1.

            Yes, it’s a new strain of flu. Yes, it’s easily transmitted. Yes, it’s pretty bad.

            But this is not a pandemic.

            But as always, the nonsense of media and government creates opportunity…

            You CANNOT get swine flu from eating pork. And yet, whole countries like Egypt are culling their ENTIRE pork stock.

            Short term, demand for pork will fall. But when all this calms down (and it will), there will be a shortage of pork from all the culling.

            Short term, understandably, the price of frozen pork bellies and lean pork on the commodities exchange has tanked. Longer term?

            Contrarian traders are now BUYING pork on the exchange.

            By the way, they’re also buying natural gas (and natural gas stocks).

            So once again, “thank you” to the media. And “thank you” to the shuffling zombies on Main St for sponsoring them.

            Alright, moving on…

            What’s this? What’s this?

            An organization that has trouble delivering a simple letter has just gone into the car business…

            Government Motors (formerly known as General Motors) has been taken over by the unions and the government. Now, line workers and bureaucrats will be making Amerika’s automobiles.

            I bet BMW and Toyota are quaking in their boots!

            Hey, how many forms will I have to fill out to buy a Chevy now? Will it ever arrive if I do order one? Will I go to jail if I DON’T order one??

            It’s risible, to say the least, but not that surprising.  

            Now, I appreciate that people would lose their jobs if GM was allowed to go under, but what is the consequence of this? If GM wasn’t making cars enough people wanted (and clearly, they weren’t), how bad will it be now? How will they possibly compete??

            And so, it will go on losing money.

            Whose money?

            The taxpayers.

            And so, the USA gets poorer as a result.

            If we thought GM was an inefficient, money-draining monster before, you ain’t seen nuthin’ yet!

            But there’s more to this and it’s worrying to anyone who takes the time to read history instead of celebrity magazines…

            The relationship between the State and industry is an indicator of how the government rules. It is necessary for a totalitarian state to not just control industry, but to BE industry. That’s how it was in Soviet Russia.

            Did you know that some of the banks did NOT ask for government funds but it was forced on them anyway? Now, the government is insisting that banks do NOT pay back this money ‘yet’ by imposing stress tests on them. AND wouldn’t you know, banks that owe the government money are effectively under government control.

            Understand, governments’ raison d’etre is total CONTROL. Unchecked, government spreads like a cancer until all you’re left with is… government. This is known as Socialism.

            We live in extraordinary times. We are truly witnessing one of the greatest irony in modern history: China (a supposedly Socialist country presses ahead with Capitalism) while Amerika (a supposedly Capitalist country presses ahead with Socialism).

            If you were an international financier, would you invest billions in Amerikan business? How would you know the government weren’t going to steal your money like they did to the GM bondholders?

            Add the printing money episode to the equation and any half-intelligent person could see we are on a fast track to becoming a banana republic. I would never keep money in a banana republic and neither should you.

Mark Patricks

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