Quick Market Headlines for April 21, 2008

Plan "fixes" bank profits & liquidity, allows house prices to fall

Taking a cue from the Federal Reserve, the Bank of England has proposed a massive bank bailout.  The current plan would have the central bank swap about $100 billion of government-backed bonds for "$100 billion" worth of mortgage-backed securities - effectively putting the banks back in the black and shifting the financial burdens created of declining home values on to tax-payers.   

It has often been said that "Those who do not understand history are doomed to repeat it."  Well, I've studied a lot of history and I have come to a slightly different conclusion:  Whether or not you understand history, you are still doomed to repeat it.

Stock brokers are bullish and futures indicate a quick jump in the Dow Jones Industrial index to a psychological ceiling around 12,700.  Commodities are up and the dollar is pointing down - for Wall Street backed by the Fed its back to "business as usual." 

With his hawkish voting record and verbal rebukes against America's less reluctant allies, is McCain the unifier that can bring the free world together?  No way.  McCain's foreign policy and international outlook is misguided and frankly, impossible.

Professional politicians, investors, and journalists are working in concert to push forward new legislation to greatly expand the powers and role of the Federal Reserve.  "The markets have failed" they protest, and the solution they see is more central planning.  The problem is, more central planning will only re-enforce the herd mentality that created the housing bubble and the current commodities spike.

Of all the conspiracy theories that may come up in American political discourse, there is one that requires nothing that is supernatural, or even particularly out of the ordinary.  The players may only be vaguely familiar:  Rockefellers, Morgans - and the Federal Reserve (whose part tonight will be played by Ben Bernanke, a PhD economist with education from Harvard and M.I.T.)

The Fed decided on 75 basis points and immediate trading shows that this is a little less than what investors were expecting, but acceptable.