I think it was the movie “Demolition Man” with Stallone describing a future dystopic society the prohibited speaking negatively about conditions.  Certainly the movie was more about explosions and Rambo’s positively unVictorian courting of the female lead character than a thorough discussion of why we, as humans, always want to hear the good news affirming that we are right and correct in our decisions, instead of being correctly told we’ve made incorrect decisions.

I think there’s an inverse economy of scale in telling people they’ve screwed up their financial lives.  If I’m talking with a man, one-on-one, over a cup of coffee, we can constructively discuss the errors he’s made and encourage positive actions.  If the man brings his wife (or vice versa) the conversation must include many points of justification as to why mistakes were made, and how it was a good idea at the time, or gulp, my broker told me he sold that to everyone. Emotionally, we don’t want to be wrong in front of a crowd.

How does one warn an entire nation that the path is wrong?  Our government has destroyed the value of our currency by 99% since the Federal Reserve was created by the banking interests. Our future obligations for Social Security and Medi-welfare will require Soviet level tax policies.  Financial asset bubbles have been popped, yet the same failed actions that extended the Great Depression have to be experienced by another generation.

I encourage you, dear reader, to unplug your TV. Stop being told what news means. Start using the internet selectively to read the news yourself and discern meaning yourself.  Broadcast information has to be made happy and unoffensive enough to placate the masses. Narrow-cast information, as in the internet and blogosphere, by the nature of its creation and necessity of avoiding dilution, is direct and poignant.  Stick with the new media.

T-bills are trading at a yield of nearly nothing, the same prices at the depth of the financial crises in the past year. (Perhaps I should add, the crisis has not gone away or been papered over, instead, it is just part of people’s awareness.)  The weak Greeks have screwed something up overnight, and the Dubai petro-princes have discovered that even foolish loans have to be repaid.  The risks of the world haven’t gone away, and the Congress’ Federal Reserve continues its war on savers at a time when we need savings.

This is largely a repost from Jeff Matthew’s “Is Not Making It Up” blog.

Comments from Emerson Electric CEO David Farr.

“I’m Not Going to Hire Anybody in the United States”

“Now, to tell you how bad this is and tell you what I think Washington is doing right now, Washington is doing everything in their manpower capability to destroy US manufacturers, fundamentally destroy US manufacturers.

“Cap and trade, medical reform, labor rules, whatever they want to do, raise taxes. They’re just going to destroyed jobs. We have already reached 7.3 million jobs in this downturn. We’re going to 8. That is a summation of the last four downturns.

“So what do you think the recovery is going to be in jobs? It ain’t going to be very good. I listen to everything Washington is doing — wasting money, raising the deficit to 10, $12 trillion — the debt level to 10, $12 trillion, going to $23 trillion; raising taxes; putting regulations and requirements on me as a manufacturing company.

“What do you think I’m going to do? I’m not going to hire anybody in the United States. I’m moving. So they’re doing everything possible to destroy jobs, in my opinion. That’s my opinion as a manufacturer and we employ 125,000 people worldwide. So I do know what the (expletive) I’m talking about.

“We used to employ a lot more in the United States and we will continue to move [all this]. When I see guys like this, Wall Street bailouts, car bailouts, I’m looking — what are these guys doing with our money? They’re wasting trillions of dollars, trillions of dollars.

“So what they are going to do, they’re going to pass a new medical healthcare, raise my costs, jobs will go. Cap and trade, tax me, jobs will go. It’s pretty straightforward. What they’re doing right now ain’t working. 8 million jobs, summation of the last four downturns….

Estimates are that global government banks and agencies have shoveled against the bubble upwards of $30 Trillion (that’s a ” T “) in direct aid and indirect guarantees.  Does that mean we’re facing a hyperinflationary hell?

Not necessarily.  If the trillions upon trillions were in the form of currency, then we’d be on a direct path through Thermopylae. Instead, the vast vast majority of the aid is in the form of credit reserves and contingent taxpayer guarantees.  So long as the reserves remain just that — reserves — and are not put into general use, then their effects on the system are limited only to keep zombie banks (and their creditors & establishment owners) above ground.

Behind the curtain — think Wizard of Oz — the central banks are trying to figure out the best way to remove these reserves from the system.  And government/central banks have never been able to time that shift correctly.  Fortunately, the public’s unwillingness to borrow and the bank’s unwillingness to lend keep the reserves out of reach.

(BTW, I facilitate the local Dave Ramsey Financial Peace University course. Believe me, people are increasingly very unwilling to borrow.  I mean not a thin dime  ever, ever again.  And we’re teaching our children that too. There are inter-generational consequences to this extended crisis.)

The general market (summarized here with the S&P500 ETF) has had a powerful up trend the past eight months. A peculiarity of it is the major trendline connecting the price action in March, July and early October.  To make it to new high ground (toward “Point A“), the market will have to pass through not only the natural doubting resistance of new highs but also up through the strong trendline.

Failure to press through toward “Point A” possibly sets us up for a head and shoulders reversal.

Linked here is an extraordinarily interesting CSPAN commentary & Q&A with Janet Tavakoli.

Did the Fed pass out regulatory “Get out of the doghouse FREE” cards to banks today, or imply that workouts are up the banks and the Fed won’t help?

Is this related to investor whale Wilbur Ross warning today against the beginning of a “huge” crash in commercial real estate (CRE)?

Cash for Clunkers costs taxpayers $24,000 per car .

CNN breathlessly reports that this “stimulus” program added to GDP.  Why, if it were that simple, we could just borrow and spend our way into prosperity forever.

Uh oh.  What if the world really doesn’t work that way?

The character of the market this fall has been for the uptrend to fall under pressure, but inch up into newer highs. Once it makes new highs for the move, the rally – by definition – has resumed again. The sloppy action among the market leaders and the weight of the many distribution days has been too much and the market is now in a correction.

Remember, a ‘correction‘ can last a few days or a few months. Be patient. Read & research.  Build the watch list.

“Corrections”  don’t mean the market will plunge 60% in the next week. It’ll take six months. Just kidding!   Given that IBD research has shown that 3/4 of stocks follow the general trend, it will likely be difficult to make headway in your stock or mutual fund investments against the downtrend.  I understand that sounds like I’m saying, “You’re going to get wet when it’s raining.”  Instead I’m encouraging you to plan your next picnic when it’s raining so you’re ready to go when it stops raining.

Oh, to be free enough in time and money to attend a bona fide economics conference; such are the dreams of nerds. As the Austrian School economists congregate in Spain, we can only tune in via blog updates from the dapper Jeffrey Tucker.

The second full day in Salamanca – by Jeffrey Tucker

Here was a nugget from a presenter, a businessman from London. “…As he was attempting to transact business in Iceland, he recalled very well correspondence with the Iceland central bank. He asked whether he can send Euros in a business deal. They wrote back “no, we are in danger of going bust.” He praised the bank for being honest, and keeps the email as a historic memento.”

Despite the relatively high number of days of institutional selling (signified by stock indexes down in price on higher volume) we should recognize that the market’s uptrend has resumed.

The bears have lots of reasons, but no one can argue with the tape (for too long, anyway.)

UPDATE: the sentence above seemed cryptic upon re-reading, so premit me to elaborate a bit.  We’re still facing several days of distribution in the past few weeks, so it wouldn’t take but a day or two of terrible action to again raise the “Yellow-Caution” flag on the market.   The DeMark indicators – a technical voodoo I don’t follow too closely – still shows meaningful ‘tops’ are in place for the S&P500 as well as some foreign currencies.  The English (& loose) translation is that any “Green light” means proceed with caution.

UPDATE: Oct. 28:  The character of the market this fall has been for the uptrend to fall under pressure, but inch up into newer highs. Once it makes new highs for the move, the rally – by definition – has resumed again. The sloppy action among the market leaders and the weight of the many distribution days has been too much and the market is now in a correction.

Remember, a ‘correction‘ can last a few days or a few months. Be patient. Read & research.  Build the watch list.