Economy

I happen to fully believe that our
markets are being largely influenced by official acts, both overt and
covert.  My logic is simple; where motive and opportunity co-exist, the
burden of proof shifts to the accused. 

The Central Banks and the Treasury
had a powerful set of motives to shift money away from commodity hedge
funds and into the stricken banking system.  Their opportunity is both
well characterized and self-evident, so I won’t go into that here.

The stock price of Washington Mutual (WM) is down another 25% this morning, at well under $3/shr.

There is no way for this company to raise capital, and therefore no way for this company to survive without a bailout. This company is toast. Time to write the obituary.

I am expecting FDIC receivership any day now, perhaps this weekend?  Who knows.  

NEW YORK (CNNMoney.com) — The budget deficit will jump by $246 billion
to $407 billion this year, the Congressional Budget Office estimates in
a report released Tuesday.

"Over the long run, growing budget deficits and the resulting increases
in federal debt would lead to slower economic growth," the agency said.

Today the S&P 500 stock index lost more
than 43 points, or 3.4%. This was a harsh repudiation of the US
government bailout of Fannie and Freddie over the weekend.

Actually, this bears a bit of explanation.
In the chart below of the S&P 500 I have marked three arrows. At
the purple arrow, I want you to note that the market was selling off
quite severely, and then, magically, at 11:00 it turned around and went
powerfully in the other direction. At the time, I watched that and
thought to myself, “Huh, somebody knows something I don’t.”

The housing crisis is the symptom that resulted from the largest, most dangerous credit bubble in all of history.  While I try to locate some compassion for the government’s and monetary authorities’ attempts to contain the damage, I remain concerned that they are focused on the wrong issues.

I see them as treating symptoms, not the underlying disease.  While it is remotely possible that they can hold this thing together long enough that it can fix itself, this remains a long-shot.

Here is yet
another bit of data that is utterly out of line with the concept of a
still-expanding economy. In 2002, we were still mired in the
after-effects of the 2001 recession.

So how is it
possible to (allegedly) be expanding at a rate of 3.3% at the same time
that layoffs are so high that they are better matched to a recessionary
period?

Here is yet
another fuzzy number that is so far off the charts as to be
unbelievable, or even laughable.