Poor Silvio Berlusconi. He was hit in the face with a heavy statuette of the Duomo – Milan’s famous cathedral. To our knowledge, this is the first time the image of a major religious building has been used to try to assassinate a head-of-state.
In the West, no president or prime minister has been murdered for many years. In Italy, it has been 31 years since Aldo Moro was kidnapped and killed by Red Brigade terrorists. In America, Reagan was shot in the ’80s…but survived. The last US president to be gunned down in office was John Kennedy in the ’60s. And it’s been more than 200 years since France cut off the head of Louis XVI. Seems like much too long to wait for another one. After all, the best form of government is benign tyranny, as George Bernard Shaw reminded us, tempered by assassination.
Meanwhile, the financial world keeps working its way through this period of great confusion and uncertainty. Nobody knows what to think. Nobody knows what anything is worth. Nobody knows what to do.
It’s always this way…to some extent. But this time it’s worse. Financial authorities are to blame. Instead of letting the chips fall where they may…and where they could be picked up, weighed and re-organized…they caught the chips, wrapped them in gauze of cash, and tossed them back into the air.
Now we don’t know what they’re worth. We don’t know what anything is worth.
The price of stocks went up yesterday to a 14-month high. The Dow rose 29 points.
Gold, meanwhile, put in a positive performance. It was up $3.90.
Is the correction in the gold market over? Our answer…which is just a guess…is that the correction probably hasn’t really even begun.
But let’s look at the economy itself.
We look at the economy because it is the source of wealth for us all…it is the thing that gives value to our investment assets. If companies can’t make a profit, they are not worth owning – at any price. If, on the other hand, their earnings rise, so should their capital values.
So what’s happening in the economy? Well, the recession is said to be over. But what does that mean? Again, with so many phony indicators and so much fraudulent information around, nobody knows.
The malls are still moving the merchandise, but only by offering “deep discounts,” says the LA Times. A survey of shoppers shows that they intend to cut their buying by 15% this holiday season. Let’s see, 15% is about the limit of the profit margin for most retailers. Take away 15% of gross, and they may be losing money. And then take away 15% all the way up the chain from retail to wholesale to manufacturer. Not a situation that is likely to increase employment or stock prices.
This year will see a record number of corporate defaults worldwide – with most of them in the US. One in five college borrowers defaults. And New York governor Paterson says the state will end the year with negative cash for the first time ever.
Unemployment is increasing. Retail sales are decreasing (despite recent data that seem to show the contrary.) Thrift is coming back into style. It’s a depression, after all. It won’t stop being a depression until some major adjustments have been made; specifically, consumers have about twice as much debt as they can comfortably carry. That debt needs to be defaulted on, paid down, worked out, inflated away, or otherwise written off.
Don’t worry…it will happen. All in good time.