Monday, August 8, 2011

The Need for Immediate Decisive Action

Congress is enjoying their vacation, so deserved after nearly bringing the nation to a default on its debt. The finger pointing continues, at least among those profound thinkers who are not getting suntans on the beach. Eric Cantor reiterated his opposition to tax increases. Time Fiscal responsibility will just have to be restored on the backs of the poor and the middle class.

Apparently, the politicians are doing their own pathetic imitation of Wall Street's Masters of Disaster. Decisive and urgent action is necessary to avoid another potential recession, yet that is lost among the chosen few. By urgent action, I am referring to a real stimulus program financed by the immediate closure of abusive tax loopholes, such as the carried interest loophole for the benefit of hedge fund billionaires. The target revenue raise from the elimination of those loopholes needs to be at least 200 billion over the next five years, since all of that money needs to used right now to finance infrastructure projects to be built over a similar time span. This needs to be done on a bipartisan basis, with a lot of smiling Democrats and Republicans at the signing ceremony. And, it needs to be done right now. The danger is that the nation is about to slip into another recession, and the government has no bullets left to cushion the blow. It is simply a fact that, except for corporate profits, the nation has not recovered from the last Near Depression and is in no shape for another one now.  


  1. There won't be a bounce because the mutual fund redemptions put in late are executed after any opening bounce the next day. So, beware any bounce before the onslaught.Recent mutual fund cash levels were barely above 3%, LOWEST IN HISTORY.(zerohedge)They went thru it already.Hard to get short with parabolic inverse ETFs at this point, with "The Beard" spouting-off tomorrow.

  2. At this point, I doubt that QE 3 would make much difference over the intermediate or long term, so Uncle Ben can say or do whatever. The knee jerk response may be initially to take stocks higher.

    Maybe the FED needs to start selling those positions, realize some large capital gains, and send the money to our destitute Uncle Sam to help him pay bills.

    It is my position that the FED is doing more harm now by keeping rates low. That policy, called the Jihad against the Saver Class, deprives savers of funds and crimps their spending. The economy now has a "demand" problem and not an interest rate problem.

    I am not allowed by the LB to buy stock double short ETFs by the LB when the VIX is over 20. Since I do not have margin accounts, and do not trade options, the only way for me to hedge now is to sell stocks.
    Fortunately, I did my stock allocation reduction before the selloff. Any sales now are relatively minor and are mechanical based on the movement in the VIX as explained in today's post (8/9)

    I suspect that any bounce will be sold. Individuals who were in the market are no doubt in a panic mode.