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America Fading Into Sunset?


World may not always view the US as financial superpower.


The new president will be taking victory laps all week long ,but there's another president I hope we pause to listen to. Tomorrow, Russian President Medvedev will issue a state of the union address that will largely focus on how America messed it up for the rest of the world.

I'm sick of this stuff. A year ago when everything was rocking there wasn't a single head of state that thanked America. Instead, many heads of state talked of de-coupling and how unimportant America had become. We heard about the ensuing era where America would fade into the sunset like the British and Roman empires. It's possible this will be how things unfold in the future, but if so it will only happen because America taught the world about capitalism - even the mistakes that could occur within a capitalistic system.

Don't get me wrong: Capitalism is in the DNA of human beings. We love to compete. We love to help each other and if we can make a buck in the process all the better. We love to build, starting from those sand castles at the beach when we are only toddlers to families, businesses and skyscrapers. The thing that happens is, we become victims of our own success. Even when people are doing great financially and are making more money than they have in the past, they tend to feel bad about themselves if someone else is doing much better. That's envy at work. I hope it doesn't rip apart the fabric of our country, because there are a lot of folks hoping that happens - including the aforementioned Medvedev.

We're going to hear a call for Russian businesses to aggressively make investments abroad and a push to have the ruble play a larger role in foreign reserves. I like the idea of being encouraged to invest abroad rather than being punished for establishing footholds around the world. It's a smart move, particularly since America is going to only be a margin player in the future, right? I say that with tongue lodged firmly in cheek, but I'm serious about not browbeating American businesses to pay wages that are too far out of the realm of economic reality. The rest of the world will descend on America on November 15th and try to force an agenda that would see the United States voluntary cede its power and stature in the name of helping everyone and making things fair.

The Market

Yesterday was a good session all things considered. The Dow finished essentially unchanged. Still, it looks like the index is right on the cusp of a serious breakout. Beyond this level, the Dow has room next to 9,600 then 1,040. That would be a great rally all things considered. It could be the post-election rally that is very likely despite mixed historic data. The problem for the market right now is declining volume.

I think the market is as nervous about Friday's employment data as the election. The one thing about the market is that it slumps mightily when it's tried for a week or 2 to clear a key resistance point. So, while the market acts like it wants to break out, if it continues to stall the pundits will be talking about re-testing the bottom in a blink of an eye.

Click to enlarge

The Economy

There are trends in the economy that can't be altered, including the retrenchment of banks even as those same banks are lining up at the trough of taxpayer money. Yesterday it was reported by the Federal Reserve that banks have tightened lending standards across the board.

  • 85% banks tightened standards on business for commercial and industrial loans
  • 95% banks tightened standards on large and medium sized businesses
  • 60% banks tightened standards on credit card debts
  • 65% banks tightened standards on other consumer loans

Auto sales saw a mind-boggling plunge last month - so much so I'm considering bringing back the horse and buggy. (Hey, don't laugh. It will provide jobs that can't be exported, but I worry about the price of carrots and oats.)

The only good news is gasoline prices continue to tumble. But as I've said before, be careful what you ask for because gas this cheap isn't great news when the reasons are taken into account.

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No positions in stocks mentioned.
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