WHY WE ARE HEADED MUCH LOWER
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Ø No one, and I mean no one, likes Obama’s stimulus package. When you see Democrats struggle to support these socialistic ideals, you know that they are a bad idea. Less than 15% of the stimulus will work its way into the economy in 2009, while the rest will go to support bankrupt social programs…a bottomless black hole. Obama came into office with a 70% approval rating, and unless he wakes up and fast, he will see his numbers go the way of George Bush. What happened to “change that we can all believe in”?
Ø Shades of the Great Depression. Have our leaders forgotten what turned a terrible recession into a Depression during the 1930’s? Protectionist international policies, massive government spending on programs that hurt the economy rather than help it, huge debt levels that cannot be supported, attacks on our own economy, class warfare, and tax increases that kill American businesses and the middle class. These exact policy mistakes devastated the US (and global) economies in the 1930’s and for some bizarre reason we seem to be hell bent on repeating them.
Ø The “good bank, bad bank” plan to save the banking system may be good for “some” banks, but for 80% of them it is the kiss of death. Obama said as much yesterday when he said “there will be a time for banks to make profits, but now is not that time”…wow. Banks that made good decisions over the last 5 years should survive, and those that ran their businesses into the ground, all while paying their top execs hundreds of billions in obscene bonuses, should fail…just as you and I would if we ran our households and businesses in a similar fashion.
Ø In the coming year, hundreds of billions in debt must be refinanced throughout corporate America, and just as its impossible to re-fill a balloon with a slow leak, applying band aids to our economy now will leave us with a sick, damaged economy much like Japan has experienced for the last 20 years. They too attempted to support banks and businesses that were failing, with stimulus program after stimulus program, and the result was a stock market that has dropped over 80% from its highs. Do we really want to go down this road? In addition, there is approximately $5 trillion in global debt that will be issued in the coming year, and if other countries apply the same US standard to fixing these problems, then we will experience a global depression of unimaginable magnitude.
MARKET UPDATE
With the lack of real leadership from Washington, this brutal bear market seems determined to go lower. The scary events happening in the global currency markets indicate a repeat of the September-November 2008 crash. I see little chance that this bear market recovery will continue and look for the next big move to be lower.
Kip Herriage
Editor, VRA
