understanding the psychology of behavior

I wish an economist would be so inclined to connect the Inventory build of the recent quarter to the recent surge in the Service Sector. Then correlate this to the rise in the transports (and maybe even adding to the rise in the entire market.)

This is my superficial theory, but I aint no economist.

Sorry… just re-read this post, and I realized I stated no conclusion to it… the point is that the ISM number was already known via the GDP and factored into the market.

I could not have said it better than these guys… (article)

The news was not good today, but Mrs Market is not being effecient here. (I mean COF to be up on this news… news that further suggests the deterioration of the consumer.) In due time, it will correct itself.

(This is why I put so much emphasis on Charting. My charts stated to be bullish the other day, yet the fundamental are crap, and no easing of this ‘crap’ status other than a BS rebate check that will barely pay for 3-4 weeks of Gas.)

Anyway… becareful out there.

The US Economy still sucks out there.  The Fed Statement provides a hint of bullishness within the economy, but there is no bullishness.  Job Growth is no where in sight, Wage increases are barely present, housing inventories are still too high and the cost of every day items are TOO HIGH.

Until things begin to shift, the markets will continue to suck.

Call me a biased market bear, but that is reality the way I see it.  Things are not good, and the Fed can no longer do anything, so now the system must heal ITSELF.

(This is my take away from the Fed statement.)

There are a lot of articles out there stating the ‘Fed notes still indicate economic weakness’.  Economic weakness is very obvious (especially after the market declined so badly in Jan).

But a good thing to keep in mind is that over the past few months the Fed notes were basically wrong as a predictive measure to the state of the economy.  As such, there is no reason to hold these notes any more credible then the previous ones. (Obviously the notes move markets, but its something to keep in mind.) 

“IMF says that world economic growth will slow to 3.7% in 2008 and 2009, 1.25% lower than growth in 2007.”

article

The Headline reads… “Oil prices up $2 as economy slows”

Whatever rationale people want to put on rising prices, so be it. BUT, ultimately supply/demand rules win.

Slower economies mean less commodity use, which means lower-to-flat prices. (the basic rules never change)

The Fed easing did not help the credit crunch.  Upon the Fed easing the markets continued its down fall, the dollar declined, commodities rose and the credit problem spread.

The Fed easing, IMO, was needed as the decrease in employment continues. But the Fed needs to do something concerning bond values.  Bond prices are declining because of margin calls.  These forced sells are pressuring equity prices.

The bond price decline in recent cases are not due to fundamentals, but rather market supply/demand forces.  Margin Calls force the unloading of the bonds or assets, pressuring equities to the down side. Over leveraging is to blame… aka… Arrogance is to blame.

These clowns who think they are really really smart, just keep facing humbling moments in this environment as the current situation does not permit ARROGANCE!  Leveraging upto 18:1 with little risk management or exit plan is just stupid. (I do not care how smart these clowns thought they were.)

This really boils down to clowns thinking they were lions. Anyway, I digress.

The Fed needs to facilitate the credit market and get it moving so asset prices do not further deteriorate, and ultimately gets the economy moving again.

Do they need to cut rates more? I do not know, but at the moment, that does not seem like the solution.

1. Price controls

2. Restrict short-medium term loans, particularly to energy intense enterprises.

(article)

Well that is one why of getting a handle on it despite the lack of free market solution. (I do not like to see the solution handled via restrictions, but would rather have policies in place to allow markets to handle economic situations, but this is better then a over heating collapse in a year or two.)  I wonder when the Bush Administration will produce policies that will promote the easing of inflation in food and energy? 

Oooohhh wait… they will not… they will just ride it out until Nov 2008 as they veto the Energy Bill to push Alternative Energies.

Based on Bernanke’s talk with congress he will mostlikely cut by 25basis points on March 18th.

But he really is in a tough position.  I mean we sit here with high food and energy costs, yet the government/administration is not promoting the proper policies to reduce these costs.

The Bush Administration flat out stated a veto to Energy Bill if the tax breaks to Big Oil are omitted from the Bill.  By doing so, they veto the push into alternative energy, and solar tax breaks.

The biggest obstacle for Bernanke is the Bush Administration… we know where inflation is coming from… attack the problem with a specific solution and the problem will go away. (And no, I am not becoming a hippy )

Buffett’s company made a HUGE purchase in Kraft… huge.

Could this signal a relative peak for commodity prices? I’m just throwing it out there. (He is making almost a $4billion bet on a food company, where costs are pretty high all due to commodity prices.)