Hughesair (Inflection Point)

Retired physician and air taxi operator, science writer and part time assistant professor, these editorials cover a wide range of topics. Mostly non political, mostly true, I write more from experience than from research and more from science than convention. Subjects cover medicine, Alaska aviation, economics, technology and an occasional book review. The Floatplane book is out there. I am currently working on Hippocrates a History of Medicine and Globalism. Enjoy!

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Thursday, April 16, 2009

Liquidity

Just to put things into perspective, it is not 'common investor's' liquidity driving the market. The money is just not there, but the market is confirming a significant move. My guess is the institutions are feeding in a wholesale market, buying at bargain prices.

The treasury tax day collections trail last year by 19 billion, and month to date trails last year by 28 billion. Year to date (Sep 30) is off 126 billion whilst the Treasury debt has increased 1.8 trillion from this time last year; National Debt is now 11.161 t.

When banks do not loan -- have you checked those fine print notices from your credit card company lately? -- the main source for business financing comes from expanded equity sales at hopefully higher prices. Earnings sound good this week as companies report 1st quarter profit, but it's a delicate balance. Productivity of small business and hiring has to out pace inflation. Expect a GDP of 28 trillion soon, one way or another. 14 trillion GDP will not support a National Debt of 11 trillion.

The stock market always precedes recovery and it has to in order for small business to prosper, and drive the economy; that's where the jobs are.

There is still some 58 trillion of hedge fund, derivative and credit default swaps -- near worthless paper out there somewhere. Who knows how they are going to bury that mess. Lets hope we can regulate and make transparent, so that sort of extreme distortion will never happen again. Wall Street is essential to our economy, but the dark pools and hidden over leveraged paper is nearly as criminal -- at least in a moral sense -- as the investment scams we read about.

Hopefully too, our Wall Street engineers and physicists will be forced back into science and education by the the defaults -- some of their own creation -- and into the engineering of a new energy, transportation and environmental paradigm. :)

Disclaimer: I am not an economist. The comments here are from the street of hard knocks, and are one old man's opinion. Do not invest in equities on my say. Do your own research. It will be far better than what you get from the commissioned stock broker.

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