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Why is it that people trust the media so much? While I admit that I am an avid CNBC watcher I simply do not understand why everyone trusts what they have to say. They initially came out blasting Obama, but then all of a sudden they embrace his policies, no matter how destructive they are. I was never a believer in media bias until after the election and the bailouts, which GE Capital subsidiary of GE the parent of CNBC received part of, where handed out.

Political bias aside, the real damage the network does is through its pitch men, Jim Cramer, Larry Kudlow and super dip shit Dennis Kneale. Frankly, they are totally clueless about everything that is going on. Cramer calls the bottom of the housing market, a few days before an announcement of further declines and horrible housing data, he used new permit data and saw what he wanted. Kudlow has continually called a rebound in the economy in the face of continuing horrible data. Finally Kneale called the end of the recession as of Thursday based on two data points.

The truth of the matter is that none of these people understood the real problem which was a credit problem, not a liquidity problem. Credit has not really improved and the consumer is in worse shape than ever. Unemployment is not a lagging indicator for this problem, it is a leading indicator and is going to get much worse. The higher the unemployment rate climbs the greater the credit card, foreclosures and auto loan defaults there will be. That is where the problem lies, not with liquidity.
The Fed is not helping matters by not allowing institutions to fail. While no one wants banks to go under and people to lose their jobs it is imperative for the markets, not government to sort things out. Now we have zombie banks that are still under capitalized and not lending money to consumers. Not to mention, which I find embarrassing, is that 45 banks have failed this year, 45 with a trillion in bailouts! Seriously, how can that happen?

We cannot have a consumer based economy that is massively in debt, both consumers and the government, and expect to be the powerhouse we once were. We need manufacturing to succeed which is exactly why China is such a powerhouse, they produce things while we do not. It is a matter of time, as recent news stories have indicated, before the world will seek a new reserve currency. I am not saying the dollar will be dumped overnight, it could happen, but it won’t, rather we will see foreign banks buy short end treasuries and just let them mature, which is what is happening now.

The massive, inflationary, stimulus package has done nothing to create jobs and will fail to put a dent in the unemployment problem. The Fed’s own whisper number is 11-14% for unemployment by next year and the real irony is that the Obama budget was based off of BS numbers of 3.8% GDP growth and unemployment of 9% or so which means much more deficit spending to come.

The Fed is in a pickle, they need long-term rates lower, but they are at zero now and have spent a ton of money buying government debt in the market already. In other words, the only way that long-term rates can decline is through quantitative easing which is monetizing our debt and devaluing the dollar. They know not what they are doing, but Cramer and Co. embrace Bernanke as a hero, seriously? He got us here and did not see the writing on the walls then, but now he’s a hero?
Regardless, the media has been spinning a recovery for months now, why? Clearly no one wants this thing to get worse, however the markets have gone up which means we are all set and things are fine. That is what Cramer and Co. all say at least. What we are seeing here is not a recovery, but a factor of two things.

1. The market had to go up because it was massively oversold, in the short-term.
2. The dollar weakened significantly which is really, really bad, but a boost to equity prices.

This is merely a dead cat bounce, period and to deny it will prove devastating to your portfolio, in our opinion. It is important for you to realize that we are bullish on the US, but we are disciples of the Mises Austrian School of Economics. Based on the teachings that we embrace we see more trouble with the debt being issued, dollar weakness and governments policies. We do believe that the free markets, which don’t really exist anymore, can correct itself, but cannot be left all on their own and needs regulations.

Now, all of the Cramer and Co. will preach a bull market to make us feel better and deny all that has gone wrong and misdirect you into believing what is false. They parade all bulls and few bears on the air to cheerlead, and that is what they are doing, stocks. They pat themselves on the back for writing books that are after the fact and late to the punch. They chastised Peter Schiff and Roubini on the air before the crisis happened, and they predicted it, and now only give them limited air time because they are telling you the truth – things are not good.

Harry Dent is even predicting another leg down, to 5,500 on the Dow, but he is not given any air time. Now, I can understand why as Dow 30,000 never happened, but in his recent book which was written in March of 2008 he predicted exactly what we have seen. Based on what he said and what we know the Dow and markets will sell off starting in July. We say that you should move into protectionist mode again and dump equities and dollar cost average into the market.

Buy ETF’s and annuities. ETF’s give you liquidity to dump the holdings in the middle of the day or whenever, versus mutual funds which make you hold losses through the day. Annuities give you guarantees which you will find useful in the long-term. Hedge dollars with either foreign currency or precious metals, physical metals are always better than buying tracking ETF’s.
Bottom line, this thing is just getting started so get ready for a hell of a ride. We acknowledge we may be wrong, but we have not been so far.

cnbc jim cramer larry kudlow dennis kneale inflation economy stock markets Sphere: Related Content