Dear Trader

During Ben Bernanke's latest grilling on Capitol Hill, he was asked if another handout would be a good idea.  After his tepid approval, the English-majors-turned-financial-experts in the media ran with it:  BERNANKE RALLY!  Is another handout going to make things right this time?  I have my doubts.

House leader Nancy Pelosi wants us to believe that we need another round of stimulus.  What about the other trillion or so in handouts you ask?  Oh never mind that.  Ms. Pelosi hasn't had a chance to write her own bill for her own voters yet; therefore all that has done before is doomed to failure - until her bill is passed of course.  From the little I have heard to date about this plan I can assume the following; it will cost another $300-billion, increase food stamp programs, extend unemployment benefits beyond 52-weeks.

Ben Bernanke said the following today - If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers.  Such actions might be particularly effective at promoting economic growth and job creation.

Nowhere in his statements does he suggest increasing welfare will cure our ills.  Nowhere does he suggest that increasing unemployment benefits to such lengths that one wouldn't even bother to look for a job for months on end is the answer to the problem.  And nowhere does Mr. Bernanke suggest that handouts to profligate spending State governments are necessary. 

Unfortunately, he also doesn't suggest that what has already been done should be allowed to work.  Nor does he say that recessions are part of the normal business cycle and should be welcomed in order to run the bad actors out of town.  Nope, he's just another economist that believes if you pull this lever and push that button at the Fed, the result at the end is economic perfection - yet it NEVER is.

To be fair, I was not in favor of President Bush's so-called stimulus package of $150-billion either.  In his plan, the IRS sent checks back to taxpayers in various amounts in hopes that it would spur on the economy.  As I had said it would fail - it did.  Americans used this money to buy necessities, but mostly to pay down debt.  It was a colossal waste of money and Nancy Pelosi's will do no better.

Let's have a look at the current bailout program, shall we?

1)     Stimulus package - $150 billion, of which $28 billion went to those who paid NO income tax.  In Joe Biden's neighborhood (he claimed in the debate) they call that fairness.  In my neighborhood, as well as Karl Marx's, it's called income redistribution.  Did the stimulus help?  No.

2)     Bear Stearns stolen - $30 billion.

3)     Housing Bill - $300 billion.

4)     Fannie Mae nationalized - $100 billion minimum.

5)     Freddie Mac nationalized - $100 billion minimum.

6)     AIG - $123 billion.  Yes, just 3-weeks after the initial $85-billion, AIG came back for more money!

7)     Detroit auto makers - $25 billion, with $25 billion more on tap.

8)     Wall Street in general - $810 billion (with pork).

9)     Various Fed emergency loans; TAF, TSLF, and other alphabet soup nonsense - $500 billion (estimate).

10)"New" bailout - $300 billion (estimate).

The new total of $2.438-trillion is in a word: staggering.  Yet, Congress moves on with more spending, further indebting this country for decades to come.  All of this money will be borrowed, and with it comes the yolk of interest.  US dollar hegemony will not last much longer.  European nations are pissed at the US and demanding another Bretton Woods agreement, but this a topic for another day.

If last week's mini-rally continues, look for a pop to 1050 - 1080.00.  Before it gets there, however, the market will have to deal with a gap fill level of 1002.30 that could offer some resistance.

 Today's Trading Tip: