Home late yesterday and again today! Trying to get some work done and out the door before the long weekend. The new lawn is starting to show some "green shoots", and these shoots are the real deal!
Federal and State Judges Ready to Back Fed/Treasury Actions
The Chrysler move into bankruptcy at lightspeed hit it's first speedbump when an Indian pension fund files for a delay/halt to the proceedings so that their position could be heard as to what kind of compensation they were entitled to under law. These things usually can result in minor to major delays for various actions.
The courts realize that the best way to minimize the jarring effects of a speedbump is to, counter-intuitively, run over them really fast. In a summary judgement delivered less than 24 hours after the original motion, the bankruptcy court judge said "out of luck chumps" to Indiana. Please see Zero Hedge for the complete written ruling.
I am sure that having no legal recourse when it comes to settling business matters will have a wonderful effect on private investment going forward.
Tuesday belonged to California as there was a big vote that decided whether ever escalating taxes would solve the state's budgets issues or if the process of waiting for the FEDs to bail them out would be the road taken.
The votes are in, and the California voters rejected all tax games and funny spending tricks to finance the states losses. All eyes will be on Washington for the next move.
Mish has been all over the story, and I would point to his site and these relevant posts:
California Rejects Propositions
California Elected Officials Pay to be Cut 18%
That was fast! See, change you can believe in!
Any Way You Look at It, Sideways Market Likely
Calculated Risk often posts a couple of charts from the site DSshort. These charts are historical comparisons between bear markets in past with our current bear in comparison.
Lets start with the chart "Four Bed Bear Markets" and see what we can see (Click on charts for larger view):
Looking at this chart I come away with the following thoughts:
-It is a close call between the Oil Crisis line and the Crash of 1929 line as to which scenario the current market fits in
-If you like the Oil Crisis idea; slow and sideways looks likely, all things being equal (which of course they are not)
-If you like the Crash of 1929 idea; a slow spiral down is still in the months ahead
The other chart is called the "Mega-Bear Quartet" and this chart compares today's mess with the biggest busts in history over a longer time frame. The other culprits are the Nikkei 225 (1989-2000), Nasdaq (2000-present) and the DOW (1929-1938):
This longer term chart is a bit more provocative.
My take away ideas:
-Today's market action is hardly without precedent or historical context
-All the items listed exhibit classic post bubble behavior; big crash-long move sideways-trending up over the long term at a slow rate
-The bottom scale is YEARS; not days, not weeks, not months, but years.
I would call attention to the last point about the time scale. Everything the government has done is built on the idea that a turnaround is right around the elusive corner. The massive balance sheet growth of the FED and the never ending bailouts, backstops, and guarantees are all measure meant for a short term fix. The calls for a "V" shaped recovery, now almost the consensus, all cement this idea.
Now look at that chart again.
It is my opinion that the FED and the Treasury know full well that their plans cannot last years in effect. That is why I believe even more intervention is a sure bet. What this will entail I can only guess at this point as every trick known is in place and quite a few that were never imagined before.
Long term, only dollar devaluation, debt destruction, and forced inflation will shorten the long move sideways. Shorten, not "make short". The action in the dollar and gold today seemed to indicate a small but growing recognition of this fact.
Are pensions and those about to retire prepared for this?
Are States prepared for this?
Is the US government prepared for this?
And most importantly, are YOU prepared for this?
Have a good night.