Today will be another market test of strength

Yesterday American markets recovered but are dangerously close to past support levels. Still the administration has no plan to resolve the mortgage toxic waste banking crisis that Rangel and Dodd created. A poll this week shows Dodd now has an unfavorable rating and could be unseated just as his father was for corruption. His father also took small gifts from those he helped. Dodd got a special mortgage deal on his house from Countrywide and refuses to disclose the interest rate or whether the price was inflated so that he could take out more cash than it was worth.

The market gains last week have given the market longer life so that according to the Re-spiral indicator the window for exiting this current rally is two and a half weeks now. Cash flow wise the market is sound but when the market is so close to resistance levels and when the administration is hysterically proclaiming the “D” word every other day it cannot be to good for retiree 401s and consumer sales. The Obama administration is the major financial crisis right now until they stop talking and come up with a real plan.

Yes, the spending plan can give the economy a bounce but it will also create a bubble of inflation much worse than President Regan had to cope with after Jimmy Carter. And as everyone knows that Carter inflation bubble caused a recession just as bad as the one we face today so the next bubble will be much much worse. A run on stocks today by short sellers would be very dangerous.

Remember from the 50 year period of socialism in once prosperous Eastern Europe and once prosperous Cuba that they did accomplish an equal distribution of wealth by reducing everyone to equal levels of poverty. But Stalin had to kill an estimated 80 million people in the Eastern block to do it and about 25% of the Cuban population had to flee for their lives as well. So Obama’s socialist vision is not a pretty sight to look forward to. The democrat-socialists already want to silence critics with a new FCC restriction of the broadcast of any free speech that is critical of government tyranny and corruption.

So Obama Socialism is no less dangerous than it was in East Germany. For example. American Socialism can be expected to completely wipe out investments because zero value makes it inexpensive for government to nationalize. Just look at what they have already done to their first victim, the banking industry. Geithner was the person who during the last administration recommended and got the complete failure of one American bank before the Bush administration stopped listening to Geithner.

Last night Asian markets were down with China down 0.6%, India down 1.6%, and Japan down 3%. Hong Kong was down 2.3%.

At this moment most European markets are down between 1% and 2%..

The US market futures indicate a slightly lower opening level. Sales figures should continue to get worse most of this year because they are not quoted correctly on a seasonally adjusted basis from month to month. Instead they make sales look twelve times worse by quoting it on a year to year basis. They think that is ok because it is comparing season to season but it is not OK for this reason. When sales decline just 2% and stay down 2% for the entire year they report it in such a way as to make investors think it has continued down another 2% every month so that after 12 months … investors are thinking sales dropped a total of 24% when in fact sales are down only 2% for the entire year not 2% every month.

These hysterical socialist doomsayers want to look like Leninist - Castro heroes when in fact they are Leninist - Castro economic disasters waiting to happen. These new Democrat-Socialists are the economy’s greatest threat today. They have yet to admit the new political party they have become.

Unemployment numbers will continue to get worse but the layoff rate should drop substantially in February and continue at a lower rate but one that exceeds the rate by which jobs are created. In fact the stimulus plan will have almost no effect this year unlike a tax cut or a check for every taxpayer. But then the socialists do not care because this is not an election year.

Most likely, the market will continue to trade in a very wide 25-50% range until the democrat-socialists can be voted out of office in 2010. The market for stocks continues to be characterized by favorable valuations and improving market cash flow and market breadth. The market action is bad because the world fears that the last bastion of economic liberty and reason (America) is becoming more socialist-Marxist.

American socialist-Marxists are even publicly talking about limiting American free speech, gagging the critics of socialism, and Jimmy Carter recently said the state of Israel is the Mid East problem. If they gagged all the democrat-socialists that would probably unleash a raging bull market.

But today Obama has the market where he wants it and he wants to see all rich people lose all their investments so they will believe capitalism has failed and will then buy into his social revolution. Unfortunately America is the last island of economic and social freedom, the last hope. Only when you give up hope will socialism reign again as it did from the rise of Germany’s National Socialism until the fall of the iron curtain.

The socialist require that we give up hope and turn to government for everything. Only when you have your government job will the socialists be able to truthfully say it is not your money anymore it is the money they decided to give you and that they can take away. You will no longer be able to say, “No it is mine because I earned it!” And if you don’t show up and wave the red flag on May Day you will have a new job sweeping the streets.