The NEW US Economy - Truly A Joke

The US economy has officially involved into a farce.  It’s a joke.  It’s surreal.  Everyday CNBC talks about endless bailouts of private businesses.  Banks are insolvent.  There is no doubt about it.  They would all have failed had it not been for the TARP money and the endless expansion of the Federal Reserve’s balance sheet. Money managers try to devine rational suggestions for asset values.  The chatter continues.  Bottoms are called.  Bottoms are broken.  Markets gyrate each day, but make no real forward progress.  The days of BUY and HOLD are dead on arrival.  You can no longer survive in the “New US Economy” unless you have a trader’s mentality.

The government is now so deeply involved in the calculation of asset values, that the “free market” as we knew it, prior to 1987 is dead.  This is now a market that is manipulated and controlled by the US Government.  Currency, Bond Prices, Interest Rates, Stock Prices - all subject to the US Government’s whims. The Government, by setting policy and determining which assets need to be written off or not written off, make it impossible to put any faith in the numbers which the accountants spit out on a quarterly basis - 10q’s.   Numbers printed on financial statements are about as worthwhile as toilet paper.  The world is changing too fast.  A three-month look into the rear view mirror ain’t going to cut it in the “New US Economy”.  It’s not going to help an investor to provide any semblance of value.  What good are financial statements? Aren’t they supposed to help one to understand what a business might be worth. How do you value a bank or an insurance company in the current environment?

Some of the largest asset managers are now managing the balance sheet for the Fed - Pimco, Blackrock (BLK), Wellington etc.  They are getting paid by the government to manage the assets.  Can we trust these firms any longer? What are the assets worth?  If the market is no longer free to determine values, then I would suggest that it’s not a market that you want to be involved with.

If you owned equities at 1570 on the S&P 500 (^GSPC) back in October of 2007, then you’ve effectively seen your assets cut in half.  It’s not inconceivable that the SP500 could find itself at the 500 or 600 level in a short period of time.  Are you going to put money into managed accounts that are 70 to 80% equity and close your eyes and hope that the US Government is going to solve your problems?  This would be stupidity.

Each day brings new discussions about executive compensation and the spending of money by those institutions that took the TARP/bailout money.  Congressman and Senators are going to question more closely the spending of all funds by financial institutions.  This is effectively promoting class warfare.  The middle class vs the titans of commerce and finance.  It’s going to be an epic battle.  The wealthy CEOs and CFOs that have pillaged and raped once thriving companies are closely enmeshed with a government that is seeking to support the “crack” habit.   The government is forced to feed the companies with TARP.  The companies try to do business the old fashioned way, but the cries from the middle class are too loud. Congress must address or at least give the impression that they are monitoring the situation - lest the middle class start to revolt.  It’s not a good situation and it’s going to get worse.

Banks that made bad business decisions should be put out of business.  The Fed and the Treasury are playing chess with the American’s future.  The US goverment cannot go on forever just printing money.  Worldwide millions of people are losing jobs, income, shelter, and food.  They will not sit passively while those in charge destroy their futures.  At some point the cries will become louder.  The drum beat will grow louder.

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