The Big Dilemma

Anyone who trades in a diligent fashion must weigh abstract as well as numerical observations. Several key considerations have to be price and time of the month. However, the abstract matters have equal importance for shaping the overall condition of the market. This condition, or more often stated as an environment, always succumbs to the heaviest externals. The past year has seen the monumental influence being the Federal Reserve but in a manner never before experienced. The accepted traditional role of the Fed has been to set monetary policy thus affecting the economy in a broad based fashion over an extended time frame and intensified their efforts to focus entirely on the short term. Their efforts have been lauded by ‘wall street’ obviously, while main street continued to flounder. Is wall street the handsome prince while main street is the ugly step sister? Again this is obvious as the trickle down theory of 25 years ago has stopped dripping, mainly because wall street bathes in champagne while the spigot for us on main street has been closed except to receive dirty water.

Examining history can quickly and decisively tell us how excesses and obese consumption comes to an injurious end. It is a fact I closely follow “those who do not heed the lessons of history are destined to experience them” lets print money and use it to inflate stock prices while the big banks thrive. Is it right? Those who have a conscience know that answer.

Here is what history teaches us, the year is 1999. Our government endeavors to convince us that the upcoming millennium could be disastrous as computer malfunctions would be detrimental to our economy. The stock market went to all-time highs, greed is rampant, rational thought is nil and once again we bought a bill of goods of disaster being accepted by our omnipresent government. The short term picture was addressed while the long term picture was ignored.

The year 2000 arrives and the excesses are removed, violently. The omnipresent government created volatility while unleashing chaos. The stock market has a 50% correction in the S&P index while greed is crushed, fear is rampant, but rational thought is still nil. Is 2010 going to be any different? Are you a learned student of history or participator in the spin doctoring of our government once again? A 500 point S&P rally has been manufactured to irrational heights given a backdrop of our omnipresent government saving us, the “us” being Goldman Sachs and friends. A simple calculation of a 50% correction would take the S&P to 900. I am writing this on April fools day 2010. Unfortunately this is no joke or should I say the joke is on Main Street.