The Market Got Happy ; )

Yesterday the market got happy:) Everything is now okay, the world is stable, and everything is good....for a day or two. Euphoria led, and the market hit 11,656 (our first top at 11,670). The July580C went well above our top sell, and hit 19.00. Profits were huge, and the testimonials from subscribers were never ending.

With this said, the market will soon top. Trust nothing. When the feds kept its interest rate at 2% the market euphoria never stopped. The FEDS explained to us that inflation is lessening:). For those of you with an education over 2nd grade, I"m sure you know this to be true, just as there are WMD in Iraq.

Oil dropped. The market was ripe for upturn. This is what turned the market. Readiness for an event that "moved" the market.

And now for a dose of non-partisan reality. The United States of America has a government it can no longer afford. The latest budget projections are calling for a $ 500 billion budget deficit for the coming fiscal year. The mantra on Capitol Hill is "Spend, spend, spend." After Congress passed a $ 150 billion stimulus package earlier in this election year, some politicians are calling for yet another stimulus package. And the Senate is now considering a bill that would increase foreign aid by $ 700 billion over the next ten years. How much will the housing bill passed last week cost? $ 100 billion? Is it any wonder that the euro is worth $ 1.60? Just recently, Dallas Federal Reserve Bank head Richard Fisher said that the unfunded liabilities from Social Security and Medicare come to $ 99.2 trillion! These numbers are mind boggling and pretty frightening. You can certainly see why the dollar is rapidly losing its status as the world's reserve currency. Yields on U. S. treasuries can only rise.

There are rumors of a rebellion within the ranks of Ben Bernanke's Federal Reserve Bank, led by Dallas Fed chief Fisher. Fisher is apparently joined by Gary Stern of Minneapolis and Charles Plosser of Philadelphia in calling for a rate hike at the Fed's next meeting in August. Said Stern, "The Fed cannot wait until financial and housing markets stabilize before raising interest rates. Headline inflation is clearly too high, and could feed through to core prices." And Plosser said, "Real interest rates are negative, and can't stay there indefinitely. We've got price pressures clearly throughout the economy. Ultimately, rates are going to have to go up, and the only question is the timing. It's important that we act before inflation expectations become unhinged. We need to reverse course. I anticipate the reversal will need to be started sooner rather than later. But don't expect these rebels, who are in the minority, to convince Bernanke and and his cohorts to raise rates before the election. At least there is some discipline at the European Central Bank.