Why does intelligence create dumb actions?

I returned from Nevada after spending a week helping my mom, who moved back from Maine, get situated at my sister's. I didn't use the internet for over a week and I was surprised to realize that I didn't miss it. Spending this time in the desert showed me how much of my focus is using the computer. I am rethinking my life in that context to see if it serves me.

A subject I have found fascinating throughout history and today is how individuals disrupt their lives over the most unintelligent actions. Today, the story was released that the president's head guy talked to the former democratic president, Bill Clinton, to persuade a congressman to drop out of a race and allow the other runner to win the primary. A high-level position was offered in exchange. Whether it was paid or unpaid is in question. Actions like this can topple a president. What I find striking is that they asked someone who was impeached for his own behavior. What is it that breaks free from the unconscious to change a person's life overnight? We all experience things out-of-the-blue, many which may be viewed as negative. It is more apparent with someone in public office.

This appearance of manipulation under the guise of 'politics' gives me an uneasy feeling, especially when I see that those in high office are ethically challenged. I think the Universe is pointing to a change that has originated with a couple individuals here for the rest of us to learn from. The quote, "absolute power corrupts" shows that people who act in this manner have convinced themselves that they are above it all. What catches up with them is the impartial justice of the Universe that is created by the actions of the individual.

China and the Long Term View

I decided to write the next blog when the market went up, and today was a big uptick.  It is surprising the Citi is being credit for this, along with the intention of reinstating the uptick rule when shorting stocks.  I think today's gain is still the bear working, since these fluctuations are normal.  

My main focus for this blog is China.  Several recent significant events have occurred:

*  Ms. Clinton's visit to China did not include any discussion of 'human rights.'  The focus was on money.

*  The Dalai Lama  has publicly said how his people have been through 'hell on earth' under Chinese rule.

*  China's military said that our Navy 'broke the law' when they circled our ship with theirs.

China has a surplus of cash as we continue to dig a deeper hole of debt.  They are becoming stronger financially through our actions of borrowing. I am concerned that we may be 'naive' in thinking that China will continue to act as in the past since we have been the major buyer of their products.  With both Congress and the President being of the same party, I am concerned there is no one standing back and looking beyond the immediate to see the potential of what lies on the horizon as a result of our indiscriminate spending.  Yes, the Republicans are speaking, yet I think they are basically ineffective in  promoting a conservative agenda.  When I look at the other major players (countries), they are all weakened from lower oil prices, their debt, and the continue fallout of the banks from bad loans.

Housing values are expected to continue to fall for the rest of this year, knocking another 20% or more.   This will keep the current bank challenge in the forefront.  We will reach the 'law of diminishing returns' and then the question is 'what's next?'

The Unquantifiable Bailout

We are definitely living at a time of great change mirrored in the financial arena of the world.  The citizens of the U.S. are going to assume more debt, collectively, to rescue the financial sector due to dire consequences of what would happen if we don't.  When congressional leaders, the president, and the Fed got together last night and listened to what lies ahead, there was a stunned silence of 5-10 seconds.  When politicians have no words for that period of time, there is a landscape portrayed that none of them have experienced before.  The total liability is not measurable as this time, but 'hundreds of billions' means closer to two to three trillion.  I worked in the defense industry for 20 years and no contract met its original estimate, especially those funded for new design and technology.  We are dealing with the same here.  The ones deciding what to implement to save the U.S. financial system are having to be creative.  

This 'Plan' covers toxic mortgage-backed securities that banks hold.  The government would take these off their hands, hold them, and try to sell them again at a later date after they figure out the maze of who owes who. 

Today, the SEC put out a list of 799 financial companies that are excluded from the short selling list.  I think they should have excluded all companies like Britain did under pressure from us.  

Has anyone started talking about the bond insurers yet?  They are a new wrinkle in this financial fabric that is being sown.  Today ABK dropped 42% and it was on the excluded short sale list.   Our system has evolved to be so expansive and intricate that no one person or group understands the total ramifications of our actions.  Keep looking for the red flags like ABK.  There is a blind path here that takes a special dance.  We are only learning what the steps are.

We are only 11 days away from October, the month that has historically reflected major changes for the market.  What does October 2008 bring?