Friday, September 17, 2010

The Extinction of the Middle Class

Well, it's great to be back. 

Two weeks ago I would have thought leaving for a week would have meant it would take me forever to get caught up with the markets after not researching them for several days.

Boy was I wrong.  What a total dud of a week.  The DOW is up a whopping 1% since Monday.  Big whoopty do. 

It's no shocker to me that the markets are now essentially directionless. 

At this point all the market really is are a bunch of robots that continue trading with one another.  No human wants anything to do with this manipulated casino. 

When nobody wants to play in the sandbox anymore you should expect to see several small moves with no volume.

Don't you sometimes wonder where we would be right now on the DOW without the HFT's and hedge funds?  Something tells me it wouldn't be pretty.

There is very little liquidity without these two players.

So what's an investor to do during unprecedented times like these?

It appears many have said the hell with it and have decided to buy a bunch gold.

Gold hit a record $1284 an ounce last night before pulling back a bit today.  Take a peak at the ETF GLD over the past few weeks:

Quick Take:

I am not surprised at the price action we have seen on gold. 
Can you really blame investors for hoarding gold given all of the instability in the markets? 

The way I see it:  Gold has morphed from a classic "inflation hedge" into a "safe haven".  I think investors are finally realizing that the whole financial system is essentially insolvent. 

I think many investors are buying gold as a hedge their bond holdings which are priced in dollars.  Yields on treasurues remain near all time lows which tells you many investors continue to sit on large portfolios of bonds.

The currency markets sure aren't helping things when it comes to soothing investors.  Japan intervened this week which created more instability in the FX markets.  These currency manipulations are doing nothing but destroying confidence.

All I see is a race to the bottom with all currencies as the central banks of the world all desperately attempt make their exports less costly.

The US is ramping up it's rhetoric towards China in regards to the Chinese manipulation of the yuan.  We all know this is nothing but a bunch of noise.  China will just start dumping treasuries if we try to take any real action in this area. 

Geithner knows it's "game over" for the USA if he tries anything that could trigger China to push the sell button on bonds, so don't expect much in this area unless things really start to fall apart over here.

The Evaporation of the Middle Class

We saw further evidence this week of the emergence of a two class system.  The "have nots" continue to get pummeled at the expense of the "haves".  The data below proves that the bailouts have done nothing except make the rich richer. 

Let's take a look at the facts that continue to show how Joe 6 pack is on a one way track to serfdom:

So Let's recap here:

"Here are the facts:

• The poverty rate jumped to 14.3% in 2009, the highest rate since 1994 and up from 13.2% in 2008.

• 43.6 million Americans are struggling to eat every day – that’s the most since 1959.

• A record 50.7 million, were not covered by health-care insurance in 2009.

Meanwhile, the rich keep getting richer. The number of U.S. millionaires jumped 16% to 7.8 million in 2009."

My Take:

I was going to only highlight one of the points above.  However,  they all get me so damn mad that I ended up putting all of the facts in bold.

Folks, the people are not going to take this much longer.  We saw evidence this week at the polls. 

Before I start here let me get one thing straight:  I am not endorsing the Tea Party.  I do however endorse change and the Tea Party is becoming increasingly interesting to me because they appear to best represent change.

However, let me emphasize that my point here is we saw clear evidence this week  that the USA is ready to throw every politician out of Washington.

O'Donnell's win in Deleware sent a very clear message to the political estabilshment:

The Bottom Line

I can't stress how much of an upset the O'Donnell win was in Deleware.  Castle was considered to be a "lock".  He had the full endorsement of the Republican establishment in DC. 

Castle looked so unbeatable that Vice President Joe Biden advised his son not to run against Castle because the VP thought he had no chance. 

Let's put this into perspective:  Biden's son has been groomed his whole life by his dad to become a Senator in Delaware where is his dad ruled in the same position for decades. 

Christ was essentially considered to be unbeatable by both sides of the political consensus.

O'Donnell decided to run against him without any support from the Republican Party.  She did however get an endorsement from Sarah Palin who btw is slowly becoming one gigantic political powerhouse.

O'Donnell's record was hardly impressive.  She was badly tainted by tax scandals when she couldn't pay her mortgage.  She also didn't have much political experience unless you call losing race after race experience. 

All of this should have spelled "landslide victory" for Christ.  What we got instead was a statement as O'Donnell won easily 53-47%.

There were some other tea party shockers throughout other parts of the country. 

This has sent shockwaves throughout the halls of Washington.  All of the candidates(both Republicans and Democrats) now realize that no one is safe.

The elite better watch out because the sheeple are getting resteless as they collect what's left of their government handouts. 

Karl Rove whined like a little bitch  on Fox after the O'Donnell victory.  I couldn't help but see this as proof that the elite are realizing that change is inevetiably coming to DC. 

Let's get real here folks:

The fact is Rove, Bush, Obama, and the rest of the political establishment have run this country into the ground and the people have had enough!

We haven't had a two party system for over a decade.  The yahoos that Bush nominated that got us into this mess were all kept in office by Obama....  Geithner/Bernanke anyone?

As the economy continues to suffer you can expect more shockers in November.  The most effective way you can show your disapproval for the fiasco that we are currently witnessing in Washington is by going to the voting booth.

Candidates like O'Donnell might not be your cup of tea.  However,  at this point I will take it because Washington needs massive change.

Without structural change in the economy there will be 100 million of us in poverty before we know it.

I can't wait to see the tidal wave that's about to hit Washington this November.  It's going to be a sight to remember. 

Let's hope the politicians who ride this wave of economic anger back up their promises of breaking down the toxic political establishment that has brought the most powerful country on earth to it's knees.

Disclosure:  No new positions taken at the time of publication.