Thoughts on Markets

Tuesday, September 23, 2008

A Bailout Above the Law - Necessity of Independent Thought

Gold continues to trade around the $900 level. It is now at 897.50 and silver is at 13.30. Both are holding fairly well. The mining stocks have run upward a good bit this week, and are mixed at present. They should be much higher and may soon be.

The DJI is up about 34 and has been bouncing around a good deal, but not showing much strength. Guess all the bailouts and proposed additional ones are worrying investors. Fear seems to be capturing most of the investors and they are not taking much risk these days. In this, they are correctly acting.

Let's take a look at the situation in which we find ourselves today.

Preceded by a multitude of great news (lies) from all those "in the know" government and industry leaders, the naive were encouraged to be optimistic on the economy. The assurances have been nothing but smoke screen to obscure the torpedoes of the financial industry in America.

The last two weeks have seen the greatest series of financial failures the world has ever witnessed. We have had 12 banks fail which is really small potatoes. Then we saw Freddie and Fannie nationalized to "prevent the entire collapse" of the mortgage industry. Merrill, the Bull Company was bought out to save it. AIG was nationalized rather than allow it to fail. Lehman went bankrupt. The two remaining major brokerage houses have changed to bank holding companies to take advantage of low cost loans from the Federal Reserve to save their own hides. I would suggest that there is much more of the same to come.

A travesty is that the CEOs of most of the failed companies have been fired or exited with big bonuses for their own financial security. At the same time the shareholders of the defunct companies have been robbed of most, if not all of their equity in the companies. Then, there is the matter of the tax payers for many decades in the future will be paying for all of this fiasco.

Here are some of the analyses of the "solutions" we are being offered. Do not be deceived, we are in uncharted and very dangerous waters for the foreseeable future. We will be months and likely years muddling through.

From Casey's Daily Resource Plus today:

In a Bloomberg story yesterday, McDonald's Corporation told some of its US franchisees to seek other ways to finance store improvement because their bank, Bank of America Corp., declined to increase lending. If a very successful company like the Golden Arches Supper Club can't get more money...what are the chances for "lesser lights" out there? From the King Report on Sunday night..."We are now at the limit of what solons can do constitutionally...so Hank is trying to circumvent the Constitution, by asking Congress to write a bailout bill that grants Hank and his minions absolute power, free of judicial review. Unbelievable!!!" Yes it is, Bill. I see in an Itar-Tass story that Prime Minister Vladimir Putin has called for changing the architecture of the international financial system. He said that "the whole world economy cannot depend on one money-printing machine."

From New York Times:

A Bailout Above the Law


Published: September 22, 2008

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency,” the original draft of the proposed bill says.

And with those words, the Treasury secretary — whoever that may be in a few months — will be with vested with perhaps the most incredible powers ever bestowed on one person over the economic and financial life of the nation. It is the financial equivalent of the Patriot Act.

From New York Times:

The Party's Over
by Patrick J. Buchanan

"The Crash of 2008, which is now wiping out trillions of dollars of our people's wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another.

The new era will see a more sober and much diminished America. The "Omnipower" and "Indispensable Nation" we heard about in all the hubris and braggadocio following our Cold War victory is history.

Seizing on the crisis, the left says we are witnessing the failure of market economics, a failure of conservatism.

This is nonsense. What we are witnessing is the collapse of Gordon Gecko ("Greed Is Good!") capitalism. What we are witnessing is what happens to a prodigal nation that ignores history, and forgets and abandons the philosophy and principles that made it great."

So here we are! Welcome to Amerika, comarades. It is time to diligently pray that God will lead us through without complete collapse of everything we enjoy. Batten down the hatches, for a the big storm ahead.

As Buchanan reports above, we are not witnessing a failure of free market economics or conservatism, but a collapse of socialistic controlled economy. In fact, we are, with the latest request of Treasury Secretary Paulson, moving further into the socialism of a government more tightly controlled financial system. He has requested virtually unlimited power to "save us." This will fail, too!

The God of all the earth did not allow the other Towers of Babel to bring a utopia to the world. He will not allow this one, either.

I still believe that precious metals will be the media in which most of our investments must be placed. It seems more than ever, we are moving into a period of great inflation of the paper currencies of the world. This will make the precious metals, themselves, the bet means of preserving any wealth that we possess.

It is time to plan your way out of debt, hold tightly to your job, find ways to increase your income from other sources, reduce discretionary spending in all areas, develop savings and investments. Develop frugality to a greater extent. But, above all, seek the Lord where He may be found.

King Jesus is always found in His word found in our bibles. Become a daily reader of the Bible. Get to know His law and how each of us violates it on a daily basis. He has made us and sustains us moment by moment. Without Him, we are lost and guilty of sins against the Father God.

But, thanks be to our Father, because He has made the way for us to be reconciled to Him through the Lord Jesus Christ. Jesus came to earth as a man to live a sinless life and to take our place on the cross that we may share in His righteousness. This is the great good news of the gospel. It is real! Remember, it is real and He is the only way to be justified before God the Father. There is no other.

As we have moved into very dangerous times, it is wonderful time to seek out sound reformed churches which bring families together and will support one another as in the days reported in the Book of Acts. Each of need the weekly worship of God in the fellowship of other believers.

Best to each, Doug

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