CHESSNOID

Ron Paul schools one of the 3 stooges Bernanke

I really enjoy it when Ron Paul educates the Federal Reserve chairman on economics.  We need more politicians with finance experience who understand their true effects.  Even though I believe Congress did a good thing by defeating the bailout bill, the investors in the market don’t think so.  All the markets literally plunged after the fraud bailout bill was defeated.

Sept. 29 (Bloomberg) – U.S. stocks plunged and the Standard & Poor’s 500 Index tumbled the most since the 1987 crash after the House of Representatives rejected a $700 billion plan to rescue the financial system.

The Dow Jones Industrial Average slid 778 points for its biggest point drop ever as $1.2 trillion in market value was erased from American equities. The MSCI World Index of 23 developed markets slid 6.9 percent, the most in 21 years.

Wachovia Corp. tumbled 82 percent after the bank was sold to Citigroup Inc. in a deal brokered by the Federal Deposit Insurance Corp., sending shares of Sovereign Bancorp Inc. down 72 percent and National City Corp. 63 percent lower. Goldman Sachs Group Inc. and Morgan Stanley, the two largest Wall Street securities firms, fell more than 12 percent. General Motors Corp., Chevron Corp. and Intel Corp. sank more than 10 percent each as all 30 Dow average stocks lost at least 2.8 percent.

“We’ve completely decimated confidence in the markets,” said James Dunigan, managing executive of investments at PNC Wealth Management, which oversees $66 billion in Philadelphia. “I appreciate their wanting to be a watchdog. On the other hand, if the kitchen’s on fire, you don’t want it to spread to the rest of the house.”

The S&P 500 decreased 106.59 points, or 8.8 percent, to 1,106.42. The Dow slid 7 percent to 10,365.45. The Nasdaq Composite Index declined 199.61, or 9.1 percent, to 1,983.73, its steepest plunge since April 2000. Twenty-five stocks fell for each that rose on the New York Stock Exchange as 2 billion shares were traded on the floor, 35 percent more than the three- month average.

We are all affected with this attempted fraud bailout. If the Federal Reserve and the US Treasury stopped playing politics with the White House, then the market would have squeezed out the excesses in the normal business cycle. The 3 stooges Bush, Bernanke, and Paulson should not have manipulated the free markets by playing around with the interest rates (7 cuts in 7 months) which triggered the price of crude to more than double in that same period and continued to print money like we were in a giant Monopoly game. They have hurt the US dollar and now we are paying for it.

They literally caused the bubble and then it burst. Now we have to let the bubble deflate. This is part of the business cycle. We can’t always grow every year without real productivity. They can not flip this economy, like the speculators they created were flipping houses. Houses were seeing 10-20% returns for the last 5-6 years. Is it really reasonable to think everyone in California with the average household income only $56,000 a year could actually afford $600,000 houses. Only with those special liar loans was that possible, and with 1% teaser rate interest only loans that don’t amortize, those loans would implode if you didn’t sell them before they recast.

What the 3 stooges don’t explain is how buying a trillion dollars worth of bad debt with taxpayer money would actually help the economy. Trust me, spending this money on worthless paper does not instill confidence in the credit market. If this junk paper would actually make money in the future, then you would have Warren Buffet, Bill Gates, and George Soros buying up as much as they could.

The stock market might bounce tomorrow initially, but with all the uncertainty and turmoil, it may actually sell off with investors trying to minimize their losses. I don’t think this is the time to dollar cost average. This is probably the best time to stay on the sidelines and continue to be patient as the market balances itself.

I noticed stocks I watch all took big hits today and this past week. Both Google at $390 and Apple at $105 are off almost 50% from its all time highs. These are both strong companies, and they have been damaged by this recession. Yes, we are in a recession regardless of what the 3 stooges say. If they get their way and pass the Fraud Bailout Bill, then it may soon be a severe recession.