Obama and the Fed Are Out of Bullets, 5 Ways to Reload

Most of the time, markets tend to ignore political speeches. Traders know they are partisan and full of hot air. Ask any trader who he’d rather have lunch with, Ben Bernanke or Barack Obama and most of the time they’d skip the White House to tred up the steps of the Federal Reserve building.

However, in times of crisis like we have right now, Presidents have to lead. The bully pulpit of the Presidency can’t paper over wounds, but it can serve as a salve.

Obama spoke in a time of crisis today. What little credibility he had with the market was blown. The market tanked further after his comments. This time, it was looking for a little pick me up.

He advocated for a payroll tax cut(meaningless) and extension of jobless benefits(meaningless). He criticized S&PH, but his words are hollow because the scoreboard shows markets the truth. His ideas would have the same outcome as a cowboy taking a pea shooter to a gun fight.

Instead of reacting constructively to the down grade by S&P, he tried to use Alinsky politics and isolate them. Obama is out of any meaningful ideas. When the debt crisis came to a head, the world saw that. Now that the entire international economy is toppling over, the market knows it.

Nothing is going to change in Washington until November of 2012. Obama and the Democrats will advocate for their tax and spend programs, and the Republicans girded by the Tea Party will advocate for less spending for the first time in the partys’ recorded history.

The Dow was down 600 points today and it’s just getting revved up. We haven’t seen the bottom-although there were some signs the market is capitulating a bit. Commodities across the board were lower, save for Gold and Silver.

Virtually every technical analysis I know is calling for a large move lower. Peter Brandt, Tony LaPorta and the rest of them across the board are saying it’s “a head and shoulders formation” and the selling won’t stop.

The only orders buying the market are shorts getting out. There are some funds nipping at the edges, but they are not aggressive. Many traders I talk to say that in their career every time they have seen a break, it bounces. They are extremely afraid that this is the time it doesn’t come back….

I can see a way for the market to rebound. However, it would take the Congress to pass some very aggressive legislation. That is impossible right now because of the Democratic party.

My ideas would provide incentives for the private sector to administer a huge positive economic shock to the system. Critics will cite accounting numbers. We need to look at economics. We also can’t control events in Europe-so we need to remedy our situation at home and hope they take care of business there.

Here is what Washington should do:

1. Flat tax everyone at 19%-no write offs
2. Push corporate tax rates and corporate dividend taxes to 0%
3. Take capital gains taxes to 0%.
4. Immediately lift regulations on exploring for domestic energy in oil, gas and coal.
5. Allow highly skilled people to immigrate to the US, and grant them citizenship if they start a business and buy a home.

The market would stop it’s decline. I wouldn’t worry about government revenues. They will come soon enough due to the exponential economic activity that would be created.

Washington DC has our economy bottled up with its legacy tax and regulatory structure. Both parties are at fault. Both parties need to wake up and smell the coffee to get us out of the mess they created.

The Obama administration doesn’t deserve all the blame for getting us where we are-but they deserve the lion’s share of it because of the unprecedented exponential growth in spending and the size of government in the last two and half years. The growth of government under Bush was child’s play compared to Obama.

The Fed is out of bullets. Obama is out of ideas. That’s what Mr. Market is telling everyone.

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