Monday, June 22, 2009

Reality Check... Flight to Quality?

In psychology, the Theory of Cognotive Dissonance describes the psychological battle that exists between two competing views. Often times, it suggests that people can live within their own fantasy world, with little to no interaction with the real world. As long as the individuals... or group of individuals are willing to accept their beliefs, and disengage themselves from reality, then the charade and continue. The danger lies in the way an individual or group returns to reality. In a best case scenario, rationality and common sense take over. In worst case scenarios, individuals and groups can react through extreme measures and violence.

I write these words to describe several situations that have occur ed lately:

1. Iran "Elections": The people of Iran are finding out that their really is no such thing as democracy... freedom... or anything that resembles choice as election results and government actions repress the voice of reason. A government that represses its own people is a government that must be gotten rid of, and to be sure this is not the last we will hear of protest inside of Iran. This is the same government that held a symposium on whether the Holocaust took place... And in many ways, Iran represents a Islamo-facist regime similar to some of the most radical in history. There are a growing number of people inside Iran who are disillusioned with their government. Life, Liberty, and the Pursuit of Happiness... Not in Iran.

2. Why is the Market Dropping?: This was a headline from Bloomberg today, as another 200 points were peeled from the Dow. As many of us scratched our heads as to why the market went up so drastically over the past four months, we now know that Wall Street insiders are heading for the doors en-masse. And the saps who believed it was safe to jump back in, will be left holding the bag as the market will test March lows. Note that the same bankers who helped inflate this latest rally were able to pump, then dump their options courtesy of TARP Funds. While the rally that has brought Wall Street off its 6,500 mark from March is nothing to sneeze at, one must ask the simple question... "Is the rally sustainable?" Not with tightening credit standards, increasing unemployment, and large pull backs in consumer spending. I met a doctor who is actually talking about repairing items in his house instead of calling someone to do it for him!

Popular Culture
3. Jon and Kate Plus Eight: No folks, I do not spend my evenings watching this pseudo-reality show. But anytime parents have eight children to raise, their work is cut out for them. And a TV show where the mother and father earn a combined 175,000 per episode started off as a ten show series, then a 20 show series, and now has bloomed into a 40 episode series last year alone, we know that there is more to the story then simply providing for your family. The mother (Kate) now has a book, and is also enjoying the spotlight, whereas Jon wants to get these outside people out of his family's life... One thing is for certain, if there is no parent relationship... then there really isn't a family... and in the end it may be a bit of greed and stardom that kills the goose that lays the golden egg.

Flight to Quality?
If we were to base the market on rational outcomes we would assume that:

1. Oil, natural gas, gold, silver, and other precious metals would be trading at all-time highs as of now... but they are not.

2. Commodities such as beef, soy beans, corn, and wheat would be trading at all- time highs... but they are not.

3. Inflation would be the word of the day based on Federal Reserve Loans, Treasury Policies, and no real measure of M3 Money Supplies.

4. The Dollar flexes its muscle as the only game in town?

5. Commerical Real Estate will look for its own bailout in the near future...

6. Healthcare Reform is an issue that each and every medical lobbyist in DC will call in a favor to their favorite Congressman... and the end game will be more gridlock.

What are your thoughts?

1 comment:

AX said...

TC, best post in a while. We'll see if the Fed tries to reprop the markets until bonus earnings begin in the next few weeks.