Inflation

GDP contracted, a given.  The Feds loaning and giving billions to the top banks, backing commercial paper and money market funds.  Banks holding the money, doing the opposite of the intention of $700B bailout.  How long has it been since it was shoved through congress with the warning that there would be a financial meltdown without it?  There's a credibility gap with the Treasury with them using the 'cry wolf' approach.

Everyone is focused on the trees as inflation moves silently through the forest.   I can see a headline on the near horizon:  The world struggles to contain inflation that has jumped into the double digits.  People would argue that commodity prices are falling.  I am looking at the massive printing of money to meet the trillions of spending set in motion by Congress and the Treasury Department.  And if we end up with a Democratic controlled House of Representatives, Senate, and Presidency, then the momentum will continue with deficit spending to rescue the 'American people.'  

The good news is the stock markets don't mind inflation because prices can be raised to offset it.  The bad news is the consumer's money is worth less unless they are receiving raises or creating money to meet or exceed the inflation percentage increase.

What I find unfortunate is that we have had a check and balance for the last 8 years with a Democratic controlled Congress and a Republican presidency, and still we increased our debt by the trillions.  It appears that regardless of who is in control, the same path is continued.  I know that, at the world level, we will reach a peak regarding the debt level because there will no longer be willing and eager buyers without huge interest returns.  There will be a point where the answer is 'no.'  That will be a good turning point and also a painful one for those of us who participate in the financial system; virtually all of us.

Credit Tsunami

Mr. Greenspan said he is in 'shock' at the failure of the credit markets and that he sees this as once-in-a-lifetime tsunami.  The free market scenario did not work according to what he believed to be the path.  Look at the reverberations of the world markets as ours whip up and down by the hour, hundreds of points at a time, with no consistent pattern.  We are definitely being shown how small this world is and how intricately connected we are.  I feel we are in a world nuclear storm and no one knows the way nor what the outcome will be.

Unfortunately, there is so much emotionalism and high panic levels that more sellers are in force than buyers.  I agree it is difficult to refrain from following the 'herd,' but if you can look out beyond the immediate to a year or two from now, there will be more visibility and I believe a turnaround.  

As you know I was opposed and still am to the $700B bailout plan.  I'm seeing daily how the federal reserve is socializing company losses, like the recent Bear Stearns loss, and guaranteeing debt holders of Fannie and Freddie.  This is going to expand to a level far beyond what has been currently funded.   

My primary sector of interest is the solar/alternative energy.  That groups has been hit harder than the financial sector, dropping as a group more than 30%.  Solid stocks like ENER, ESLR, FSLR, LDK, STP, SOL, SOLF, SPWRA, TSL, and WFR have touched below their 52 week lows.  What is happening is irrational and nonsensical given that I believe this group to be the next prime investment opportunity as the world seeks to find alternatives to oil.   

Use your current financial status to review your world and what is important.  Prioritize those things and act accordingly.  Know that whatever crosses your path is there for a reason.   Seek to understand the purpose of the experience and use it for your spiritual growth.  All lessons in the material are reflections to help us see inside ourselves more clearly and make changes that better our lives.  

Recession

Those experts, like Bernanke, refrain from using the word recession even though we are in one.  This is a normal part of the market cycle and the market is reflecting this.  It's not the recession that is creating the 'whip-saw' effect, it's the lack of confidence in the experts.  The Fed has given billions to the banks, yet there is no reflection of that on the loaning side to businesses and individuals, collectively.  Paulson is now showing what we intuitively knew; that the bailout should not have been passed.  We are the blind leading the blind.  Taking one prudent step at a time is the lesson to learn versus throwing money around as if it is limitless like we have done.  The higher the country's debt, the less value of the dollar.  Where is the visionary who is looking long-term as we take a big hit in the short-term?  I'm only noticing speeches that say everyone will be rescued.  That is a victim mentality and does not allow for soul growth in learning how to be self-empowered and creative in finding a solution at the individual and community level.

In my previous blog, I mentioned two signs for my optimism.  The third sign came out today with Warren Buffet saying he is buying U.S. stocks now.  He is worth listening to because through his actions and net worth, he has lived the 'American dream.'  Only listen to those who 'walk their talk,' not those who talk according to what they think Americans want to hear.  Listen to those who reflect self-empowerment, not those who use the 'fear consciousness' to manipulate the public with only words.  When fear is present, the clarity is blurred and actions taken will be distorted reflecting this.  Again, I say this because I am thinking of our children, grandchildren and the unborn yet to come.

Optimism

Two actions occurred today that tell me we are on the road to recovery.  The bottom has been reached in the respect of contraction of the world to establish a new credit base with the result being most people reevaluating how they use credit and how to be more conservative.  The market stayed above 8,000.  First, Wells Fargo bought Wachovia and Citi backed off.  That is a great sign of free enterprise.  The government got out of the way.  It doesn't matter that Citi is going to follow through with a lawsuit for breach of contract.  That is part of the system, although I don't think is a wise decision.  Citi should be focused on their liabilities and how to support their share price.  Second, the Fed came out and said the government is going to buy stock shares of financial institutions with the plan of making a gain later when the share price rises.  That makes good business sense to me and using part of the $700 billion in this way is is a wise use of the money that will be printed for this purpose.  I have lost on paper 60% of my investment in stocks, yet I am optimistic.  I have full confidence in this country to rise up in any situation.  Our ancestors have and their energy help us continue the tradition.  

Now I am waiting for the third sign to reinforce my optimism.  I do believe in the rule of three.

The Relationship of October with the Stock Market

October is being October.  What is happening is not surprising except that it is happening on a much larger scale.  The U.S. market only dropped 2% today.  The foreign markets are a different story.  Japan falling 952 points, the largest drop in 21 years.  Russia dropping 10% and stopping trading until Friday, and Brazil also with a 10% drop, and the beat goes on.  Raise yourself above the earth and all the activity going on here.  This is a time of global change.  It's starting at the top and will affect all of us individual inhabitants.  We need to be creative and look for new ways of thinking and doing in this world.  Obviously, for those of us living today, we are ready to face the challenge, individually and collectively.  With this approval of the $700 billion bailout, we knew before it would be more than $1 trillion.  Today, we loaned AIG double digit billions in addition to the $85B.  Then it comes out that this company spent close to half a million at a California resort to have a rest and relaxing adventure for their top insurance sales people.  This kind of excess is being exposed and will continue to keep the passion energy high to make sure change is permanent and not forgotten easily.  There needs to be a purge and it is underway.  Look at this as part of our history and the timing for a 'fall.'  I think the market will settle above 8,000.  By that time there will be much purging in places that we have not even imagined.  I appreciate your own thoughts.

FDIC seizure of WM and the attempt to seize WB for City

I am fired up after researching the latest actions of the FDIC.  I sent the following email to the FDIC:

Dear Manager of the FDIC,

As a former accountant and long-standing member of the National Association of Accountants, I am writing to give you my impression of what you are reflecting with your actions on the subject companies.

Washington Mutual was seized and given to JP Morgan for $1.9B.  WM had more in cash than that.  JP was given this company.  How can you rationalize this transaction?  Now WM is attempting to retrieve their $5B in cash from JP through bankruptcy court.

Then today with Wells Fargo offering $15B for Wachovia after your attempt to seize it and sell it to Citi for $2B, it is clear that there is no objectivity in your organization.  Now Citi is saying that Wells Fargo cannot purchase Wachovia because they have 'exclusivity' from the FDIC.  I think that there is collusion going on between the FDIC and the benefiting companies.  This is anti-capitalism and certainly not democratic.  I am questioning the legality of your actions.

Please respond to this email and let me know what your view is.  I intend to pursue what I have written here.  There is an abuse of power on part of your organization.  Thank you in advance for your time.  Sincerely, Shirley R. Tamez

I also sent a copy to Wolf Blitzer at CNN, Bill O'Reilly, and Rush Limbaugh to see if I can get this information out into the open in a way where it will be publicized to the mainstream.

One other area that alarms me is with the Financial Accounting Standards Board (FASB). I consider them the backbone of this financial system that this country uses.  Wall Street pressed Congress to ease a FASB rule that deals with valuing assets at current market value.  This was included the bailout bill that was passed by Senate and House.  It gives the SEC authority to suspend the mark-to-market accounting.  It's  a fair-value accounting standard and changing the rule allows companies to obscure the true market value of their assets.  In the 1990s, the FASB wanted to force companies to expense the millions of stock-options on their books that they were issuing to employees.  Big muscle pressure forced them to back down.  10 years later, following the collapse of Enron and Worldcom, this ruling was put in place.  Allowing Congress to yield to these companies who want to revalue their assets takes away from the authenticity and reality of our financial system.  This organization is critical to ensuring that those who have self-interests are not allowed to obscure or distort financial information in their favor.  As you can see from the examples, this group provides what a C.P.A. firm does, but on a much larger scale in that the FASB originates the rules, while the former ensures they are followed.  I see this as a signpost of the unraveling of our capitalistic society because Congress is influenced by the few and is not looking out for the majority.

'Consumer Protection Plan'

The bailout is now called the subject title to help influence the individual's psychology to make this $700B investment more palatable.  I have done my best to influence who I can to prevent this because of how I feel about the children and grandchildren footing this bill ultimately.  I understand the concept that the government will buy toxic mortgages and hold them to sell at a higher amount later when the market is better.  Unfortunately, I think these mortgages are foreclosed homes that will be sitting vacant, and subject to vandalism, until the bottom of the housing market.  It's questionable if there will be any profit to pay against the debt.  I do think it will pass tonight and is the step to leaning on the house to pass it too.  It's unclear how much euphoria there will be and how long it will last, but the financial sector is definitely a place to be if you are a 'trader' i.e. in and out in the short term.  

May the highest good be served for all of the 'inhabitants' of this world with what is destined for the collective soul growth.  This means everyone, not only humans.

'Consumer Protection Plan