Manic Stock Market Does Not Inspire Confidence

Hello Monday! The stock market went down 180 points today but this is no longer unusual; 2008 is the year of break-neck rallies and steep declines and lately we do not even know what each day will bring. First crude prices skyrocketed because of worldwide demand that was apparently out of our control; India and China and the rest of the world were consuming so much more oil that it was out of our hands. Even the President went over to the Saudis begging for more production. Now the price of crude has dropped $35 per barrel since mid-July because inflation, America’s reduced consumption and a stronger dollar are helping to bringing the price down. What suddenly happened to world demand?

The Financials are hemorrhaging billions in cash to the point where we are numb to it. After borrowing countless billions from the Fed, they are still posting massive losses. Financials have tapped the Fed for at least $300B that we know of. Fannie Mae and Freddie Mac are on the brink of insolvency. No one seems to care that the government is borrowing money to finish out 2008, to pay for the war and all of these bailouts and that the 2009 federal deficit is already $1/2 trillion ($500,000,000,000) in the hole not to mention the federal debt of $10.6 trillion ($10,600,000,000,000). When will the taxpayer wake up and say enough is enough?

Consumer spending is 70% of GDP. Unfortunately, the consumer is out of funds right now and in debt up to their eyeballs. The consumer has been spending borrowed money for the last 7 years and now they have run out of sources to borrow since the credit markets have dried up. Real income has not budged this decade. Where will the consumer get the money to keep spending?

Right now, all of the behavior in the market is speculative; none of it makes any sense. Bad news is good news. Good news is bad news. How can the market reflect true economic reality when government bailouts, losses that fall short of wall street expectations and massive layoffs are considered good news these days?

What is the average person who does not understand the nitty gritty of the financial markets but is an investor through a 401k or retirement account supposed to think with the market yo-yoing back and forth, especially over the past 4 months. Regular folk are depending on the market for their retirement and this type of manic market behavior does not inspire confidence. When are we going to get back to the business of investing?