Americans for Limited Government is a site I subscribe to a news feed from, but I don't read everything that they send me, mostly because they frequently forget their mission and latch on to righty social-engineering stuff, which I can't abide.
For some reason though, I perused their list of article titles closely this morning, and I'm glad I did, because I found this article. It explains, better than I've seen it explained before, just why the big banks and their unholy alliance with the big government is a VERY dangerous thing.
The author of this piece is Simon Johnson, a senior economic writer for Bloomberg Financial, a ratings and reporting firm I trust (I don't trust Moody's), and a professor at the Sloan School of Management at MIT (one of the three major schools of finance).
Except for his infatuation with the dangerous Sheila Bair, FDIC chairwoman, a love affair I don't understand, Johnson seems spot-on in his analysis of the Street, Big Banking and the state of the economy.
Reading just a bit between the lines, I'm now going to follow my hunch and totally ignore the Dow-Jones Insustrial Index as a measure of the health of the economy. In fact, I'm now on a hunt for an index which CAN be trusted to monitor the mind of the Street with, because with Johnson's warnings, all the big investment houses and all the big banks which extend them credit are in cahoots with Turbo-Tax Timmy Geithner and "Bugsy" Bernanke, and THEIR combined goal is to run a sub-rosa economy that bears as little resemblance to reality as possible.
What is MY reality in economics? It's very basic. REAL things are all things that can be worth REAL money. A share of stock in a company that REALLY produces REAL merchandise and REALLY lists all their costs of production is a real thing. Land is a real thing. Gold is a real thing. Commodities like grain are real things, but only if it's the current crop being harvested, or at least planted and growing.
What is NOT real? Most of the "spiders" or ETF's, are not real, because they are bets on betting houses, essentially. Day Trading is not real, because all you are doing with the buy-and-sell in an hour trades is trying to harness momentum in the market, which is another gamble. Currency trading isn't real, all you are doing on Monex is riding small ripples caused by large chunks of currencies moving between central banks.
All this un-reality has to go somewhere, and it gets reflected as market activity. It ISN'T market activity, so when it gets reflected, it skews the trading indexes which reflect it. As those indexes are skewed (upwards, mostly), more phony "trades" result, with more false-positive index reporting generated.
And THAT, boys and girls, is how the Dow-Jones Industrial Average has pretty much doubled in under three years. Has our economy actually doubled in strength or size? Hell no! According to wages paid, unemployment claims filed, workers on unemployment (all REAL factors for an index), this economy is only marginally better than it was in the depth of the "severe recession" (read: Depression) that we are SLOWLY coming out of.
Don't trust the Dow. If you have money to invest in stock equities, buy actual equities, not false-front instruments like ETFs or long-term commodity contracts. Buy your stocks to HOLD and realize VALUE from, not to keep for a few minutes and make a nickel on a Benjamin when some big investor scratches his ass and the stock moves up marginally.
In other words, be REAL. You WILL make money with your investments. You won't make as much as fast as some of the flashy people who suck up to all the latest rumors, etc and feverishly throw chunks of money at passing images of financial progress, but you WILL make money by buy-and-hold, or by buying land (especially now that it's a bargain), and buying gold. Gold's currently about 9% off it's high of the year, and is a relative bargain. If you want to gamble on commodities, buy short-term contracts, no more than 90 days. There are bargains in commodities as well, but know the bacon market before you buy your first contract for 5 tons of pork bellies, or you'll get greased!