Urgent Porkulus bill to be signed as soon as president returns from vacation, and some Baltic Dry thoughts

Comrades Pelosi and Reid were in quite a hurry to pass the porkulus bill through the house and senate. Congress voted on a 48-hour public comment period prior to action. Not only did congress go back on that promise, they instead released the bill in such an untimely way that not even an Evelyn Wood speed reader in congress could possibly read the bill prior to the vote. This is no real surprise. And I’m not just blaming Democrats, although they seem to have raised such tactics to an art form. There are examples of politicians throughout history that have created a crisis with an urgent need to pass a plan to fix the problem before anyone, either those voting or the general public, has had time to think. The president is using scare tactics to frighten the public. He instills fear by making comparisons to the great depression. If he would just look at the facts and numbers it would be far more accurate to draw a comparison to Comrade Carter’s years in office, but that wouldn’t be enough to get his agenda done. So this crisis had to be dealt with urgenty, yet the president is on vacation and doesn’t plan to sign the bill until Tuesday. It is fine to take the long weekend off. But since the bill wasn’t to be signed for a few days anyway, why not let the people read it as promised, or at least let those voting on it read it? I’m sure we all know the answer to that.

I’m sure everyone has seen the Newsweek cover by now. This graphic was lifted right off the Newsweek website. My Marxist university economics professors were right, well not right, I should say correct. One thing I recall from econ 101 was something called Pareto’s Law. My college professors referred to it as Pareto’s theory instead of law, and they thought it was hogwash, but it has stood the test of time in all societies. The Pareto law or theory states that the larger incomes are received by relatively few people, and as the incomes decrease, the number receiving the lower incomes increases in a very smooth curve. This seems obvious, of course. There are those who would like to change this and have more income equality. Unfortnately, in my opinion, many of those who would like to change this are now in greater power in Washington. One thing they should think about is that nations with the largest wealthy classes also have the highest standard of living. To lower the incomes for those at the top seems to lower the standard of living to those all the way down to the point where totally equalized earnings would equalize at a very low level. There were relatively few rich in the Soviet Union. There was still wealth and power in a few hands in the government. Cuba is probably an even better illustration of this, although there are some who blame the US on their economic situation. And how many billions does Castro have? In the Cuban example most of the wealth is concentrated in a very small circle, with the rest of the population living in misery. But they do have free education and health care. I keep hearing that on NPR.
Here is another chart of the weekly Baltic Dry index. The last chart a few weeks ago had the first signs of what looked like a dead cat bounce off of a very oversold level. The index has continued to move higher, actually quite a bit higher on a percentage basis. The momentum indicator in the lower sub-graph shows the beginning of an upmove from obviously very oversold levels. The indicator is the stochastic momentum indicator, which is much smoother than a standard stochastic. Also, there is a ten period simple moving average in yellow over the prices, which also has emerged into possibly an uptrend. I say possibly because there isn’t yet any sign of an uptrend as defined by price action. So far this still looks like an oversold bounce, but these bounces can turn into trends. However, normal backing and filling to create some sort of basing pattern would be better than a V shaped bottom with a move right back up. Also, I have a hunch that this index has been receiving far too much media attention lately to still be considered a leading indicator. It is probably at best now a coincident indicator. It is still interesting to observe the cost of shipping raw goods as a gauge of world economic activity. This index is suggesting that the near collapse of global activity has been greatly exaggerated, and maybe some normalization will occur. One side note: I still plot this data by hand, as it is difficult to get charts from quote vendors and charting packages, although there are a few more resources for the data as it has become more popular. In the past many people used the stock DryShips as a proxy for the index. Dryships folllowed the down move of the index nicely, but seems to have decoupled lately as the company has had some banking issues that has put pressure on the stock price.

Stock indexes are still trending sideways, but still with fairly high volatility. The antics in Washington seem to be the main problem,  as bad earnings are probably already factored into prices. Gold is maintaining a nice uptrend, although it looks vulnerable, in my opinion, to one of its famous shake outs.