EconInvestor

Whatever happened to the “Rule of Law”? In the BP case, one wonders. Playing Politics vs. Fighting the Spill.  Here’s the Wall Street Journal take on the escrow fund: Claims Fund Offers Shield From Suits.

What is interesting in following the stock market are the patterns that emerge. Here are some articles on various patterns.

June 17, 2010 article on every other year patterns: Equities — an ‘even years’ curse?

June 7, 2010 article on almost perfect negative correlation between $USD and $SPX:  A Flawless Market Timing Correlation

“Sell in May, then go away – come back on St. Leger’s Day” is a common rule of thumb: Backtesting the ‘Sell In May’ Rule

Read the comments from “Conan the Barbarian” in this article from March 26, 2009: ‘Painting the Tape’.  This refers to the Final Hour of Trading and is a better explanation of final hour trading than that offered by the author.

Another interesting article from May 27, 2009: Is Program Trading - Especially SLP - Affecting Trade in the Stock Market?  Program trading affects the market in a variety of ways. This isn’t necessarily bad.  It is just another thing to keep in mind.

9 Reasons Why Spain Is a Dead Economy Walking. If this author is correct, Spain might have to leave the Euro Zone.

EU chief warns ‘democracy could disappear’ in Greece, Spain and Portugal. Politics and banking is always a bad mix.  Here’s the way I see this shaping up.

Greece will have to leave the Euro zone. It cooked the books to get in the Euro Zone. It has NEVER met the requirements to be in the Euro zone.

There is a 50/50 chance Spain will have to leave the Euro Zone. It is fighting a three-front war. First, it is barely holding together as a country. It is more like a confederation of states. The central government is getting weaker. Second, the housing bubble and subsequent housing crisis is going to take years to resolve. Third, its economy has run out of steam. The austerity measures may be too much too handle.

Portugal will stay in the Euro Zone for four reasons. First, its economy never took off as had Spain’s.  So, it doesn’t have to face as large a bubble as Spain. Second, its debt isn’t as bad as the debt in Spain and Greece. Third, the people will accept austerity measures because they have first-hand knowledge of the alternative. After the Carnation Revolution, the communists briefly ran the country into the ground. Staying with the EU and staying with the Euro ties Portugal to the democracies of the West. If it means austerity to stay in, they will take austerity rather than succumb to the left.  Fourth, Jose Manuel Barroso, EU Commission President, is from Portugal and will do everything possible to keep Portugal in the Euro Zone.

In the meantime, I see the euro getting weaker against the dollar. Start planning a European vacation!

Bullfighter Christian Hernandez runs out of ring in Mexico, arrested for breach of contract. In hindsight, some decisions look bad…such as being a bullfighter or giving Fannie Mae and Freddie Mac a government charter.

It’s Time to Nationalize Fannie and Freddie cries out Stephen A. Blumenthal in the Wall Street Journal (June 15, 2010) (subscription may be required). His argument is based on the following:

“During the recent financial crisis, the private label mortgage-backed securities market disappeared—and with it went the liquidity it provided to the mortgage market outside of Fannie and Freddie. Banks were left to take loans they made into their inventory, and assume both credit and interest-rate risk. They refused, and simply stopped lending unless the mortgages could be sold to Fannie and Freddie. To a large extent that situation still exists today, as Federal Reserve Chairman Ben Bernanke said earlier this month.”

People who want to nationalize usually are looking backwards rather than forwards. They lack vision. In this case, let bankruptcy take place.  If there is a demand for 30-year mortgages, new instruments will arise to fulfill that demand if banks don’t want to issue mortgages in their current form.

In any case, who says that all financial institutions won’t issue new mortgages if the government refuses to back them? Here’s a thrift that knows what it is doing:  A Thrift Where Being Conservative Pays Dividends.

In case you missed it: ObamaCare threatens your health plan. This is only the beginning.