TGIF: The Fix Is In

It’s amazing - it’s fantastic - it's… stupid!

Not STUPID, like Spain, Turkey, UK, Portugal, Italy and Dubai - who are also in major financial crisis - but stupid like because a boy put a finger in the dike we don’t have to evacuate the town anymore and, in fact, we’re going to build a whole new section of town out of paper houses right next to the dike to show how much we don’t worry about getting wet any more. That’s the global economy in a nutshell - we freak out if anyone says a bad word about it, but then we are overjoyed if someone else says it’s all fixed - even if it’s the same person both times…

Manic depression is a disorder where people are subject to extreme mood swings, going from feeling very sad, despairing, helpless, worthless, and hopeless (depression) to feeling as if they are on top of the world, hyperactive, creative, and grandiose (mania). This disease is called bipolar disorder because the mood of a person can alternate between two completely opposite poles, euphoric happiness and extreme sadness. The extremes of mood usually occur in cycles and tend to become closer together with age and, according to EMed: "Extreme mania can lead to aggressive behavior, potentially dangerous risk-taking behaviors." Hmm, does this sound like any markets we know?

The behavior of the EU and other world leaders is starting to look more and more insane every day. Yesterday Greece was literally saved in the morning, screwed in the afternoon and saved again in the evening (holding up so far this morning) and the Dow went from 10,830 to 10,950 and back to 10,840 during its session. I’ve dated girls like this - that’s why we moved to CASH last week! More and more our World leaders are starting to sound like the Joker in the last Batman movie, who said:

"Do I really look like a guy with a plan? You know what I am? I’m a dog chasing cars. I wouldn’t know what to do with one if I caught it. You know, I just… do things… Nobody panics when things go "according to plan." Even if the plan is horrifying! If, tomorrow, I tell the press that, like, a gang banger will get shot, or a truckload of soldiers will be blown up, nobody panics, because it’s all "part of the plan." Introduce a little anarchy. Upset the established order, and everything becomes chaos. I’m an agent of chaos."

Speaking of chaos, our final GDP figure has been revised down 0.3% to 5.6% and the chain-weighted price index has been revised up 20% to 0.5% and the PCE has also been revised up 20% to 2.5% - so people aren’t buying more things, but the things they are buying are costing them more - now that’s progress! Unfortunately, our American wage slaves are making no progress at all as Personal Income drops across the country. Nevada was hit hardest with workers making 4.8% less in 2009 than they did in 2008, Californians lost 3.5% of their incomes and VP Cheney’s homies in Wyoming lost 3.9% while Bush’s buddies in Texas fell 3.5% too. The new regime in DC and the good people of West Virginia fared best with a 2.1% increase (voting for Obama didn’t help as New York took a 3.8% hit) but it wasn’t enough to pull up lost wages in 42 states that gave us a national average of -1.7%. Don’t worry though, if you were in the top 10% last year, you did very well and the top 0.1% scooped up all those lost wages and more, adding an average of 14% to their incomes in 2009.

None of that matters because, even though there is no plan at all to help the bottom 90% get jobs or even to help them earn the same amount of money for the same job they had last year, at least we have a plan to give MORE FREE MONEY to the banks as the administration finds yet another way to hand out cash by tapping the $700Bn TARP fund to pay the banks to modify the mortgages on homes that people can’t afford to pay for anyway.

I want to cut through the BS and just say this is like the government paying you to sell stocks that have gone lower on you - nice deal if you can get it! Somehow the banks in this country are no longer investors at all - apparently EVERY loan they have ever written must be repaid - either by the consumer or the government. This is especially fascinating as the banks still get to keep all those years of "risk premium" they’ve been charging even though, as it turns out, they never actually had any risk. Not only that but, even given the current facts that we do not let loans fail - the banks STILL have the nerve to charge risk premiums - as if there were some chance they won’t get paid in the future. It’s GOOD to be a bank!

Asia was thrilled this morning, although the Hang Seng wasn’t acually thrilled until 2:58, when it was stuck around 20,850 on a flat day, but by 3:04 they were back at 21,100 so all must be well in Asia as they held most of that 250-points-in-6-minutes gain to finish the day at 21,053. Remember - it doesn’t matter HOW you go up, as long as it looks like you went up for the day. Also looking "marvelous" on the 1-day chart were the Nikkei (up 1.5%), the Shanghai (up 1.3%) and the BSE (up 0.5%) even though Japan’s CPI dropped yet another deflationary 1.2%.

Europe is not all that excited about Greece this morning and down almost half a point across the board. Toyota (TM) sales are so bad in Europe that they are shutting down production for 12 days and 11 UBS (UBS) and Cazenove workers are being charged in London with an insider-trading scandal while JPM (JPM), Lehman and UBS (again) are named as conspirators in a bid-rigging case. Don’t worry - I’m sure they have a plan to fix this and I’m sure that plan involves GIVING THEM MORE FREE MONEY!

Like the Joker says: "Nobody panics when things go "according to plan." Even if the plan is HORRIFYING!"

Have a great weekend,

Phil