Yet Another Buying Opportunity?

Jeff  Carter
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Posted: Nov 10, 2011 12:01 AM

You ever buy snake oil from a snake oil salesman?

If your broker calls you this evening or tomorrow and tells you this is another chance to buy the market, laugh at them. The European eruption is only beginning, and China hasn’t even begun to melt down yet. You are going to have plenty of time to have more buying opportunities. That’s why the market will probably get cheaper.

This is a comment driven market, not a data driven market that relies on fundamentals. Traders don’t watch earnings or business data, they wait for some politico in Brussels, London, Washington DC or somewhere else to open their mouth.

Then they react.

They put trades on, not investments. Few people are doing actual investing in this market. The only real way to do that is buy entire companies and assume all the risk of operations.

The only silver lining to all this volatility is that it’s hard to imagine the US economy getting any worse. If we actually put the right economic policies in place we might be able to tread water while the rest of the world stabilizes. However, currently we have the wrong policy makers in place at 1600 Pennsylvania Avenue, and the wrong party controls the Senate. But, the clock is ticking to November 2012.

Yes, the doldrums in the US are the Democrats fault. They have been leading this mess since they took control of Congress in 2006.

There is a lot we can do to stop the bleeding, but there are too many artificial roadblocks in the way. One example is the new proposed pipeline through Nebraska. If they build it, jobs will be created. Oil prices will temper a little because the supply of oil will be cheaper via pipeline than trucking it down. But, Obama has voted “present” on the project and outsourced the decision to the State Department. I am sure the bureaucracy will act quickly to make sure our economy is saved….not.

Meanwhile, the EPA, NLRB, FDA, SEC, CFTC, and other alphabet soup of agencies continue to write more regulations to put the brakes on honest businesses.

Then there is Obamacare and it’s addition to the deficit. Not only does it expand entitlements when we can least afford it, the enactment of Obamacare plus Dodd-Frank has created so much uncertainty over the outcome that business is on hold. Artificial opportunity costs. It’s like building a dam in front of a flowing river. All the homes behind the dam get flooded. Then the engineers scratch their heads and can’t figure out what to do with all the water. Inept.

This current stock market melt down is certainly was caused by Europe. We have not been able to, nor ever will be able to control economic policy over there. Like a vaccination though, we would only have caught a cold if the right economic policies were in place. It should give you pause however, because like it or not, America is on collision course to the same destiny as the Europeans, albeit at a slower pace. There is time to pull a switch and go in a different direction, assuming we get the politicians in place with the intestinal fortitude to do it.

It’s a lot easier to weather a financial storm when you are employed and earning a living than when you are unemployed wondering when the next government shoe was going to drop on your head. That’s the scary thing with the melt down this time. In 2007-08, our unemployment rate was significantly lower. People today are on less steady financial ground, even the ones that are working.

Italian bond yields shot up to over 7% today. That’s junk status in a 0% interest rate environment, no matter what the ratings agencies say. The spread over German debt reached an all time high. By the way, if Italy is that bad, France cannot be far behind. The ugliness in Europe has been postponed for over a year now. This is only the beginning.

At some point, this market will truly be a buy. It just might take until the middle of next year to figure out if it is or isn’t. I suppose it depends on the political polls. If the Donkey’s are ahead, people that stepped in and bought today will look like jack asses.