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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (5872)	5/8/2004 8:26:15 AM
From: Haim R. Branisteanu	Respond to of 116555

russ I think the market thanked few hours later after people were able to study the 24 page press release. wages unadjusted are down 20 cents hours worked are flat and manufacturing is down in hours and wages ($3.79) up is retail trade $1, financial services $5.20, for obvious reasons. IMHO the economy is spending the savings on health care, financial services (e.g. brokers fees), and nursing and residential care facilities

To: russwinter who wrote (5872)	5/8/2004 11:34:06 AM
From: mishedlo	Respond to of 116555

Three Headed Monster A rant from Roger on the FOOL =========================================================== There is a three headed monster in power in Washington that has lured America into an exposed and dangerous place in preparation for a swift and bloody kill. Or maybe not. You decide for yourself. The three heads of the monster I describe are named Federal Reserve, Executive Branch and Fannie Mae. Federal Reserve has tempted the financial sector with easy money and easy short term profits based on the carry trade. All asset classes have risen as money has poured first into the financial sector and on through corporate America to Main Street. Executives running big financial institutions have collected big bonus checks while constructing an elaborate web of derivatives that multiply the risk for the greater economy. The Executive Branch has tamed corporate America with tax cuts for business and the wealthy and lax enforcement of anti-trust laws, environmental laws, consumer protection and shareholder rights. By absorbing huge losses and building up debt at a record pace, Executive Branch has helped fuel the short term profits of companies. Executive Branch has also seduced the Legislative and Judicial Branches into complete complicity in the name of conservative ideals. Fannie Mae has seduced the general public with the all American dreams of owning a home and making money without having to work. It has bought up a large percentage of the nation's home mortgages allowing banks to lend endlessly. It has attached its guarantee to other loans eliminating the risks for lenders. The result of unlimited funds and the elimination of risk has been reckless lending on an extreme scale. The housing market has boomed, enticing millions of unsuspecting sheep to the slaughter, once rates rise, the economy buckles and home prices fall. The three headed monster in Washington may have a method to its madness. One theory suggests that a major goal (besides merely feeding the super rich) is to actually bankrupt the US Government. In so doing, there would be no choice but to eliminate all the expensive entitlements that voters have become dependent upon. This may sound crazy, but it may be the only way that recent policies of the monster make sense. Why else would the monster seek to cause such widespread devastation all at once? In the worst case scenario: As interest rates rise, many over leveraged institutions will crumble, transferring much of the debt to the US government after FDIC runs out of funds. Federal might attempt to keep rates low, but if inflation rises dramatically, no investor will want to loose money in bonds. Unless Federal wants to buy all outstanding treasuries, inflation will drive up the interest rates in the marketplace. Rising interest rates leads to widespread defaults, which leads to bank failures and bailouts for the taxpayer. They also lead to recession or worse. In the worst case scenario: No interest loans, no money down financing, and lending to individuals with bad credit eventually leads to massive defaults. Rising interest rates make home buyers unable and unwilling to purchase new homes. A big deterioration in home prices leaves Fannie unable to make good on its guarantees. Rather than facing the elimination of Fannie and an end to guaranteed loans, Executive transfers the costs of reckless lending on to taxpayers. In the worst case scenario: Executive Branch continues to wage war and overspend for the benefit of large corporate donors (mainly oil companies, defense contractors, and pharmaceuticals). This is piled on top of expenses to bail out the banking system and attempts to protect Fannie Mae, homeowners and the housing market. At the same time government revenues dry up in a struggling economy. Debt rises, interest rates rise and inflation (for commodities and imports) rises to the point that taxpayers are paying $400 Billion, then $500 Billion, then $700 Billion, then $1 Trillion in annual interest on the debt. What choice is there, but to eliminate social programs and the safety net? Is the worst case scenario likely? Probably not, but it shouldn't be discounted entirely. There are increasing calls from a growing number of outside sources to beware the dangers of the three headed monster. The longer we ignore these warnings about deficit spending, loose monetary policy and reckless lending practices the greater the price will eventually be.