Thursday, May 13, 2010

Will Socialism Fears Crash Wall Street for the Second Time since Obama Election?

European socialist union riots, environmental disasters, a myriad of economic and political realities embodied by the small-government "Tea Party" movement are coalescing to signal another possible market meltdown. While economically and politically aware people have been pleading for fiscal responsibility, politicians continue to grow government unsustainably. Hundreds of billions in anti-capitalist government spending predictably failed to solve the global financial crisis and pushed us toward a fearful future. 

David Murrin, a co-founder of Emergent Asset Management, appeared on Squawk Box Europe in March and placed the success of America squarely on the shoulders of the "Tea Party" movement. At the time, he believed that the eastern markets would be the next growth market while Americans become more fearful of the future and look toward collective security over economic growth.  This fearfulness is Mr. Murrin's description of a society in decline. Growing societies believe in individuals who take risks in order to reap future rewards.

Economic reality can be harsh. Socialism always fails. We see proof of this in the waving red flags in Greece and during "Global Warming" summits. The red flags are more than a warning signal, they are THE symbol of socialism. Socialism can best be described as slavery to government. Socialist systems breed unhappiness, entitlement, and eventual hate and violence. Americans now work 100 days per year for government which is clearly a violation of our inalienable individual right of our pursuit of happiness.

This violation of our individual rights unmistakably has lead to the following economic warning signs:
  • Crude oil prices fall 13% on predictions of a faltering global economy
  • Unsustainable government economic policies based upon false political promises
  • Unprecedented government debt levels
  • Rising interest rate pressures
  • Faltering money market liquidity
  • High domestic unemployment rates
  • 9.9% unemployment with possible increases to come
  • Skyrocketing Gold prices
  • The worst week on Wall Street since October 2008 when Obama took the lead in the polls.
  • Fear Index rocketing up 88% in a week
  • Expected American bank lending cuts
  • Rising debt costs for American business
  • Rising health care costs
  • Expected rising energy costs
  • 15.3 Million Americans out of work
  • $39 Billion IMF bailout of Greece with many more bailouts to come for other debt-riddled socialist countries

With the Stock market in free-fall this week, it is going to be make or break for the American economy.
Some items to keep an eye on this week include:

  • Tuesday - Small Business Confidence numbers and Jobs/Labor Survey

  • Wednesday - The Federal Budget report

  • Thursday - Unemployment Claims

  • Friday - Retail Sales

FSAGX may be a good hedge mutual fund if you are expecting a double dip recession.  Conventional wisdom would direct 2-5% of investments into such a hedge.  The deluge of "Buy Gold" commercials has convinced many people to invest a much larger percentage, but uncertainty in American money markets are also a factor. "Hundreds of billions in short-term loans to big European banks and other financial institutions... could push down the value of more than $500 billion in short-term debt held by American money-market funds," as the New York Times News Service reports. Insecurity in the liquidity of money-market funds and currencies lead many people toward the traditional security of gold.

Charles Fettinger

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