Tuesday, March 18, 2008

The Giant Shadow

Let’s look at this 420 point rise in the Dow Jones Industrial Average. If you owned one share of each of the Dow stocks, you made $51.66 dollars today. In order to get the cash amount, you take the rise in the Dow (420 points) and multiply it by .123 which equals $51.66. The stock market does it the other way around. They take the increase in the Dow thirty and divide it by .123. This might lose some of the new viewers, click on this link it explains the whole process

Picture an ant crawling across the floor at night in front of a lit flashlight lying on the ground; it would cast a giant shadow on the wall; Super Ant. That shadow is our Dow Jones Industrial Average and the SP500, SP100 etc all rolled into one. The ant represents the actual stocks. The shadow represents the abstract markets. The owner of the SP 500 gets paid on the size of the shadow not the actual size of the ant. As the ant walks away from the light the shadow gets smaller. It’s called leverage and it can kill you.

Then, on the Bear Stearns bail out, the real disturbing thing is the 30 billion that was loaned for 28 days to cover the collapse. The government has guaranteed that JP Morgan won’t lose a dime on this package. That’s so touching; it’s so nice to know the Fed fixed this mess at no cost to the taxpayer. On top of that there is no real inflation. The real good news, no one has lost a dime over this whole mess. Believe that and you must be over medicated.

It’s a little like taking a whiz in a half full whiskey bottle. The drunks are so happy that there is more booze than they thought. The irritating thing is that "drunks" in this example are an euphemism for "taxpayers."

Copyright 2008 All rights reserved


Anonymous said...

I received a letter from the IRS today outlining what my "rebate" will be. A rebate financed by the US Treasury borrowing still more money from China.

Bernanke really is a student of the Great Depression because this rebate is similar to what happened back in the 1930's. Back then, the government also gave out money to the citizens... but they had to WORK for it in entities like the Civilian Conservation Corp, etc... and we got things in return like Hoover Dam and the TVA. Now, Dubya is just passing around "free" money.

Now what imported items should I spend my "rebate" on?

Anonymous said...

Your posts are just awesome!

Jim in San Marcos said...

Hi Anon 8:25

I'm not sure what you should spend it on. But if you have credit card debt use it to pay it down. It makes no sense to put it in the bank--they aren't paying zip if you consider our present inflation inflation rate.

Jim in San Marcos said...

Hi Anon 1:56

Thank you for the compliment. It gives my ego a boost.

My wife teases me by saying that I probably write those Anon comments myself--I guess I can't win.

Thanks again and take care