“What do you mean, shift to a lower gear…”

·         Government and Organizations

Truckers out west are familiar with the mountainous terrain encountered on Interstate 70 between Denver and Grand Junction, Colorado.  They’re cautiously aware as they pass the crest of each great hill they climb; the trip down must be made slowly and under control, not letting the trucks’ momentum increase the acceleration.  If the truck doesn’t shift to a lower gear to keep the vehicle’s speed slow, the trucker ends up with a runaway projectile, leaving a trail of devastation. 

Congress’ agenda seems intent on pushing into law (or equivalent) as many projects as can be voted on and signed by the President.  En masse “fait acompli” has never been successful in guiding positive changes in civilizations previous to now.  Has something happened that we Americans aren’t aware of?  Congressional leadership still seems to believe that their elected majority constitutes a mandate of sorts (don’t you get uncomfortable when our elected officials forget what one of the framers of the Constitution said “…There is no maxim, in my opinion, which is more liable to be misapplied, and which, therefore, more needs elucidation, than the current one, that the interest of the majority is the political standard of right and wrong.”  Bonus points if you know who it is.  Since when does skill in ‘creating’ an electable candidate equate to the talent of common sense versus political expediency?  A better guess is that there is a negative correlation.

Be careful of the prevalent assumption expressed by the Democratic leadership about “we have the momentum now”.  It may be better to remember that with many possessions the 1^st day you own it, but from then on it owns you.

Every trucker knows you never want to miss that downshift.  The question is, do the Democrats? 

·         Markets – It’s Memorial Day, let’s go on vacation

Graduation ceremonies are the event de jour.  Shouldn’t the markets feel special too?  After all, they’ve avoided apocalypse (or at least going to zero) and have rallied some 30 to 40% (domestically) during the last 2 months.  Let’s give them a round of applause, a pat on the back, some TARP funds (or PIPP or whatever) and send them off for the summer

Trouble is, they’ve gotten out of their last semester with a lot of new debt, cut allowances (diminished cash flow), summer jobs aren’t as abundant (no rising employment here), no new credit cards (talk to Congress and the President about that one), and the prices of gas, movies and snacks are higher.

For the next 6 to 8 weeks look for the markets to go lower.  Blame the usual suspects: financials, tech, industrials, and retail.

Maybe after the July 4^th holiday stocks indexes may resume their uptrend.  After all, the Chinese love to export fireworks, and after the 4^th, they’ll be on sale.  Lord knows we can all use a bargain. Just be careful of short fuses.

Till next time