Saturday, November 1, 2008
The government will fix the economy
Is the biggest lie told to and believed by investors. Everyone waits with anticipation and trepidation when the Federal Reserve meets to decide the discount rate. What a joke! If you want to know what the Fed is going to do, just follow the 90 day T-Bill rates, as this is what the Fed does. The Fed never leads the bond market, they follow it around like a lost puppy.
The government can fix the economy as well as Cramer can pick a stock. In other words, if a government action is taken to help the economy and the economy improves, this is due to COINCIDENCE, not causation. Roughly 47% of Cramer's picks make money just like roughly 50% of coin tosses come up heads.
You want proof the government can't stop market forces? How about these myths:
"China won't let their stock market fall before the Olympics." WRONG!
"It's an election year. They won't let stocks go down." WRONG!
"The Fed will cut rates and the market will come back." WRONG!
"The Fed will just print the money and all that liquidity will put a floor under stocks." WRONG!
"The Fed will bail out [Bear Stearns, Fannie Mae, Wachovia, Citibank, AIG, etc.] and this will fix the credit markets." WRONG!
"The government will continue to devalue our currency to help exports." WRONG!
The government has incredible power to do harm, but they CANNOT and HAVE NEVER caused an economic expansion. They can cause a monetary expansion and add gasoline to an out of control speculative frenzy (a la tech stocks 1999), but they CANNOT and HAVE NEVER "fixed" the economy or made it better. Market forces will always prevail and any attempted intervention will only have an effect for a few weeks at most.
Government is a PARASITE on the economy. Government regulation is not the answer, as hopeless bureaucrats failed to enforce the many laws that were already on our books and allowed the current mess to unfold in front of their eyes without so much as blinking. Greater regulation increases expense and hassle for businesses, so they ship our jobs to Mexico, India, China, Vietnam or wherever it's cheaper and easier to make money.
Remember "subprime is contained," "our economy is basically sound" and "housing has reached a bottom"? Do you really believe that nobody saw this mess coming? Do you really believe the people who tell you that the worst is over and that they know how to fix the problems they created or watched happen while in a state of ignorant bliss? Did you know that Henry Paulson profited enormously from this financial mess when he directly helped to cause it a few years back while head of Goldman Sachs?