COMMUNITY CHEST
Okay- we have come off of a pretty hectic week- the market shook and raddled last week. About midweek I was ready to do a Mea Culpa [sort of]. I mean financial advice is like talking religion and politics- once you state your claim- it’s very hard to admit you might have gotten it wrong.
But last week I watched the Kudlow Report for a few minutes while channel surfing- and to my surprise he was talking the economy [and market] up.
Kudlow is usually a straight shooter- and he was saying the 4th quarter [last 3 months of U.S. economic numbers] might see a 3.5 or maybe even 4 % rise.
For the life of me- I thought he was wrong- but he does know more than me- so I was gonna do the Mea Culpa. Then [I think the next day?] those wonderful Euro Zone folks decided to sell some bonds [Germany] and lo and behold- they couldn’t get enough buyers so they shut down the auction.
Yeah- for Germany- considered the ‘most stable’ of the Euro Zone crowd- for them to have had trouble like this- that’s a bad sign.
The credit rating agencies already dropped the ratings for Portugal and Hungary to Junk status.
The reports came out that showed that the world’s major banks are all preparing for a Eurozone breakup- even U.S. regulators are telling our big banks [Citigroup] to lower their risk in the Euro Zone bond funds.
So all in all- the DOW dropped 4.8% for the week- the worst one week drop in 2 months- and I didn’t have to swallow the crow after all.
Okay- then why did the market jump back up another 200 or so points yesterday?
To be honest- there really was no good reason in my view. We came off of a jump in Black Friday sales- I think they sold 16 % more than usual- which of course is always a good sign when consumers are ‘consuming’.
But why did we see the jump? Please- please- let’s not all be Lemmings [you know- following the lead guy off the cliff]. Every year companies do the ‘Black Friday’ thing- which gets its name from- well doing great deals on the Friday after Turkey day.
Why the name? Oh- maybe because they used to only do it on Friday- you think?
Now- say if ‘every day’ was a Black Friday- say if we just did Black Friday all the time- would there be a huge jump in consumer spending? Heck yeah!
So why don’t we do it all the time? Because we would all go bankrupt [the businesses] and end up being permanent Zuccotti park occupiers.
So to make it simple- the numbers were up- because they started Black Friday early- like on Thursday!
Oh- the tangled webs we weave.
Those of you who remember- a couple years back the president and congress passed some big spending deals- for consumers.
They did special tax breaks for 1st time homebuyers- they did special deals for trading in your ‘clunker’ and getting a new car [Cash for Clunkers]. They even gave you money to buy Green Appliances [energy savers- not Retro looking!].
When they did this- well of course home/car sales went up- because you were giving people ‘free money’ to buy stuff.
Now- when the numbers came in- some Dems said ‘lets just keep doing it- after all- its working’ and the Repubs shut the thing down.
What was ‘working’? Well- when you give free money out- or do Black Friday ever day- yes- the numbers will look good.
But these types of ‘numbers’ are fake numbers- their based on skewed data- I mean doing these programs every so often can help some- sure- give me a great deal on some crappy car trade in- okay- I’ll buy a car.
But what happened the next year? Both car and home sales suffered- because these deals didn’t bring ‘new money’ in- they just moved up those who were going to purchase anyway- but they made the purchase while the deal was going on- and the economy- and housing markets- well they still took the hit- it was just delayed.
Now- to the real cynical folk out there- like you guys who can’t see that Herman Cain is an innocent man! [ Fine and Sandusky Too!] yes- to you nay sayers- it might just look like some politicians would love to keep giving away THE ‘FREE MONEY’ BECAUSE IT WOULD MAKE THEIR NUMBERS LOOK BETTER FOR RE ELECTION.
And so the game goes on- it never ends.
During the years called the Intertestamental period [around 400 years B.C. to the time of Christ] the Jewish people suffered lots. During their captivities they eventually lost their Temple and wound up living in a ‘strange land’.
It was at this time that the Synagogues were invented- these ‘church buildings’ were not the temple- they had no sacrifices or other priestly ceremonies- they were literally named after a word that meant ‘House of Study’.
This word is the same word used for the Israeli legislature today- Knesset.
During the time of Christ these synagogues were places where the Jewish people captured/retained their culture- while being ruled by Rome.
In the Synagogue you had 2 ‘offering plates’. One was called The Dish- this was the offering for the poor- those who needed short term help- this went to them.
Then you had what was called The Chest. This was the ‘plate’ used for more long term type help- sort of like a welfare thing.
We also see in the writings of the New Testament that giving to the poor- helping those in need- is a very noble [and mandated!] thing.
But when we see ‘free money’ that is ‘robbing from the rich to give to the poor’ as a last resort type thing- well then we are using the principle in a wrong way.
I read one article on why the Italian debt crisis [very bad as well] was not ‘seen’ as bad as a country like France [who is on the verge of getting downgraded too- geez- if they are having so much financial trouble- maybe Sarkozy should cut back a little on all these ‘mini Bush’ military ventures?]
They said even though the Italian debt crisis is real- yet outside observers know that many Italians are well off- they have saved and invested- and if worse comes to worse- they will just tax the wealthy.
For major outside observers to be thinking this- to be hedging their bets on the private money being ‘taken’ to cover the debt- that’s bad.
That’s the same language we are now seeing in our country ‘pay your fair share- flying those corporate jets- you rich S.O.B.’s!
Yes- these are all signs of the times we are in.
I have been out of the market for many years- and those who are ‘in’ most of you lost some over this last decade- and some lost a lot.
I’m not sure what the next decade holds- but if you put some money in The Dish- or The Chest [which is where we get the term Community Chest] then I think you will have spent some money well- but if you simply see investing thru the lens of how much you will get back- then I think many of you are in for a surprise.