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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (71313)	1/26/2005 8:57:49 AM
From: Wharf Rat	Respond to of 89467

Freedom and the Forty Clueless Dingbats Mark M. Rostenko We're off to a beautiful start in 2005. The S&P 500 and Dow are down 3.6% and the Nasdaq Composite is off 6.5%, the worst January in decades. Crude oil is pushing $50 per barrel and prices at the pump are on the rise again. Inflation is up (although official figures are still tame, as they are likely to remain forever and ever) and consumer confidence is slipping. Tough to be confident when you're socking away a whopping $6.67 a month toward retirement. That's for the average American family, mind you. Some folks are of course doing considerably better, socking away $10 and even $20 a month. And then there's the obliviously clueless bunch who believe that borrowing against their homes somehow makes them wealthier when in fact only the mortgage company gains. The stock market seems not nearly so ebullient as it appeared after the election. Perhaps it's growing a tad concerned with the potential expense of George W's plans to bring "freedom" to every nook and cranny of the globe, whether or not every said nook and cranny is interested. Imposing one nation's will on an entire planet is generally an expensive task as the Roman and British (among others) empires eventually learned. It's especially expensive to ram freedom down everybody's throat with a record budget deficit, but the inaugural address failed to mention that minor factoid. For whatever reason, the stock market is beginning to waver. The November surge to new multi-year highs in the major indices pushed the S&P 500 to retrace more than half of its bear market decline, thereby churning the bowels of more than one nervous bear. But today the picture looks considerably less promising for the bulls. After spending nearly all of 2004 consolidating in monotonous back and forth action, the S&P 500's breakout about 1163 held much promise for continuation of the "mini-bull" market (also know as "major bear market rally). Alas, a 4.7% advance (above the former high) doesn't exactly constitute a major breakout. Worse still, the major indices appear to have developed something akin to the classic "head & shoulders" top, although granted, it's a relatively short-term development within a longer-term uptrend. What's particularly disturbing about current market action is not so much whether or not a technical analyst might observe this pattern or that pattern. What's more important is the lack of follow-through in the wake of an event as significant as a breakout from a year-long consolidation area. That the S&P 500 should rally so little before returning to probe its former consolidation area speaks volumes. The new multi-year highs should have met with increased buying and heightened enthusiasm. Instead the highest highs were posted on anemic volume between holidays when no one was really paying attention. When new major highs fail to draw in buyers, the rally becomes suspect. And sellers grow bolder as last week's high volume decline makes clear. In fact, the four highest volume days of 2005 have all been declines. Nine days down, five days up, nearly 2:1 in favor of the bears. And the market finished at its lowest point for the year last Friday. Not a great start, to be sure. Is reality finally catching up to the market? Let's get real here, folks. In the midst of the biggest budget deficit in all of U.S. history, George W's inaugural address lays down the mandate for some mighty expensive propositions. Freedom ain't cheap, particularly when it's delivered in the form of high-tech weaponry and U.S. soldiers. Where's that money going to come from? The printing presses? In that case, say goodbye to the dollar even faster than you had planned. Taxes? That'll work. With Americans saving 0.2% of their income, where will increased tax payments come from? Consumer expenditures, that's where. Say goodbye to corporate profits. How about from a "coalition of the willing?" Yeah, that'll happen. Even the UK's Tony "someone crept into my sleeping chambers and replaced my spine with a big gooey jellyfish" Blair isn't playing ball on the "let's stop Iranian nukes and if that doesn't sell we'll rehash it as the 'let's bring freedom to Iran'" idea. (It's expected that Blair will support Jack Straw's assessment that military intervention in Iran isn't a good idea.) Say what you will about the Bush agenda. Right or wrong, moral or immoral matters not for the purposes of our discussion. When it comes to the markets, morality and "the right thing" have little bearing. The bottom line is what counts. And the bottom line will suffer from what amounts to "imperial overstretch." How do we plan to bring freedom to the entire world when we don't even have enough soldiers to get the job done in Iraq? You won't hear it on the nightly news but it's common knowledge just about everywhere else: soldiers are being forced to stay longer than expected, are being called out of retirement and resources are stretched to the extreme. It takes money to finance a war and it takes a helluva lot more money to finance WARS, plural. As if record-setting twin deficits, a dollar bear market, rising inflation, exploding debt levels, and a developing Iraq military quagmire weren't enough to lay the foundation for hard economic times ahead, now we're looking at still more tens and hundreds of billions to be sucked out our economy and into the Middle East. Is it any wonder that private foreign investment into this country is virtually non-existent? That central banks have been forced to pick up the slack in order to protect their own currencies? The world's fondness for U.S. assets is rapidly diminishing and our self-appointed role of policeman to the world isn't winning us many friends. Quoting the Financial Times: "In actions likely to undermine the dollar's value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US." That's right folks. The U.S. might have been the best place for your money in recent years, but the rest of the world is actively pursuing options and alternatives. U.S. foreign policy and domestic "bleed them for every dime they'll ever make with the lure of easy credit terms" policies are laying the foundation for very rough times ahead. The dollar is in the middle of it and it looks like the stock market is about to rejoin the party. I'm not saying financial Armageddon begins tomorrow morning at nine. In a nation where watching a brain-dead oaf pretend to live in a mansion while romancing forty clueless dingbats whose primary talent is stuffing fake breasts into a bra passes as entertainment, only God knows how long ridiculous financial illusions can be sustained. But even the best illusions break down when the proverbial chickens come home to roost. And roost they will... Mark M. Rostenko Editor The Sovereign Strategist January 24, 2005 gold-eagle.com