U.S. Stocks Set to Plunge at Open on Tuesday

U.S. stock markets are indicated over 2% lower this morning on concerns that North Korea is flexing its muscles in the east and fears that Europe is not getting its financial house in order. While North Korea is likely just playing games again, the 3-month LIBOR has been spiking higher in the last couple weeks, and is presently trading at 13 month highs. The S&P 500 looks to be breaking through more important levels on the downside this morning, which suggests there is more downside to come.

So, is this a correction in a new bull market dating to last year, or the resumption of a secular Bear Market that began in 2000? I believe it is the latter, which does not bode well for the economy.

Now, here we are, over 18 months removed from the Fall of 2008 when the credit crisis came to a head the first time. The U.S. government has thrown trillions of dollars at the economy in the form of the TARP, the stimulus package and the real estate market, and yet the problems have not been solved. The European banking system is in crisis, and the U.S. banking system is still not lending enough money. The stimuls program has been a complete bust in my view.

Where does this leave us? There are mountains of government debt. There are mountains of personal debt. And there are legions of unemployed people across the globe. I think it is quite safe to say that throwing good money after bad was a bad idea. We should have just let a few of these big banks fail and suffer what short term pain we needed to. Now, we are looking at a prolonged period of economic stagnation similar to the 1930s and 1970s.

It will take a bold new vision similar to Ronald Reagan's to take us back to our economic potential. The current powers that be were too concerned with their legacies, and now we are stuck with a huge new healthcare entitlement on top of a weak economy. The only way to work our way out of this mess is to cut personal and business taxes, AND cut government spending. Government needs to get out of the way and let the private sector lead us to recovery. Government needs to get SMARTER not BIGGER!



Scott Cole