Ian Royle

Today for my post I offer up this prediction.  Given that the U.S. congress has agreed on the wording of the law, the vote is only a formality that is my opinion.  Why would it go so high and not more or less.  Well the situation is that the U.S. worst situation is the losses being incured by the financial institutions that are propping up the fabled US consumer.  The consumer isn’t so much fable as reality.  Most people, everywhere, not just the US but in France, Botswana, India, Quebec, anywhere, when given more resources, will consume them.  Financial institutions distribute the most liquid form of resource, currency.  So these two are intertwined.  The economy falters if consumers stop buying, consumers will only stop buying when the source of their currency dries up.  Ergo, the necessary bailout of the financials.  Is this long term, absolutely not, never is.  People are incredibly forgetful.  We did this in the eighties.  Had a credit crisis and two years, later we were basking in the wealth that was Reaganomics.  And soon we will put this whole fiasco behind us and tighten up lending practices for another twenty years or so until Obamanomics or McCainonomics makes the top half of the population wealthy enough that they believe the lucky runs are the result of their inherent skill.  As for the TSX, todays moderated bounce up will be as a result of priming for the expected run on resources coming as the US economy restarts and the world economy which has been chugging along oblivious to the US stall roars.  As well financials will get a boost, but that will be moderated since Canadian financial institutions while smarting from exposure to the US turmoil, are primarily serving Canadians, in Canada, where the economy never took a beating like in the US, sure it slowed, but you’d have a hard time finding sympathy in the states.  Foreclosures never took off and jobs and income stayed steady while everyone watched the carnage in the states all the while muttering, “None of our business.”  And it wasn’t, demand for resources continued but shifted from a US centric world economy to those emerging markets which aren’t so much emerging anymore as established, and that is where we are folks.  But 500 pts?  Seriously I’d bet on up, but I haven’t got a crystal ball.  If I did I wouldn’t be writing this stuff, I’d be shorting what was going to be down by the end of the day!