Markets Move Higher as Bailout Package Looms and Fannie and Freddie as for More Billions

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Stocks receive lift from the housing market, but a deeper look reveals almost half of the existing home sales were either foreclosure or short sale.

Stocks moved higher across the board Monday showing signs of life. Volume receeded more than 10% across the board as buying conviction just isn’t there. Ratios still remain negative as the put/call ratio sits at .65 and New Lows continue its dominance over New highs. Both ratios still show those November lows will be taken out at some point. We have yet to see any real momentum to the upside. We have a low volume lateral market at the moment and are simply treading water.

Fannie and Freddie are back at the table begging for billions more to stay afloat. This should not come as a surprise to anyone, government agencies are notorious for underestimating and simply running inefficiently. I would expect this latest round of begging will certainly come around once more during the summer months. Layoffs will continue and as severance pay dries up more and more will be unable to afford their current payments. Fannie and Freddie should be allowed to fail, failure is an option and is the natural course we should allow to occur.

Our government is simply leading us down the wrong path. We continue to print money at an alarming rate, we are borrowing at an alarming rate, and we continue to spend at an alarming rate. Normal individuals in our current situation slash their spending, cut down their debt, and START TO SAVE. Somehow our government feels the need to overextend themselves and completely do the opposite. Dennis Gartman did an interview that was posted on SeekingAlpha. He describes how the IMF was advising New Zealand on their economic crisis. Thru the 1970s and 1980s New Zealand ran budget deficits and trade deficits to lift itself from its economic woos. Instead, their situation progressively got worse until Treasury Secretary Graham Scott told the IMF to get the heck out of New Zealand. Subsequently, Scott was able to SLASH taxes from a high of 75% marginal tax rate and they strengthened their currency or restricted/cut back the money supply. New Zealand was able to turn around its economy and flourish in the early nineties. Unfortunately, the new Secretary of Treasury decided to raise taxes and slow down growth.

The number one issue we face is an unchecked Federal Reserve issuing an unlimited amount of US dollars. Every single fiat currency has always failed, its time we stop borrowing, stop issuing US dollars (better yet, let’s start destroying what the Federal Reserve created), lower all taxes, and STOP SPENDING. We’d have a healthier stock market.

Enjoy

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