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Speculative Trading Indicates Rally Losing Steam

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As for the speculative trading:

More likely investors initiated this rally for AIG, FNM, and FRE. These stocks were completely out of most traders' radars until they made a big move toward the upside.

Traders are already late in the game and are chasing these stocks into the last stages of this rally on the daily charts. They will be the first ones to take profits and perhaps start shorting them down for the necessary pullback or correction.

Investors who were the first ones to see their better than expected financial performances bought at the bottom and most likely will not sell their holdings unless mitigating circumstances force them to do so. They need the next earnings season to finetune their strategies.

Speculative Trading Indicates Rally Losing Steam

There is a big big difference between 1999 and 2009 for these kind of stocks and stock runs.

In 1999, the dot.coms did not provide enough retracements or pullbacks ... so they did not have enough base preparations to sustain their rallies into the year 2000. They simply kept going up without the necessary corrections to support sustainable upsides. And so they fell like a rock when the wind was taken out of their wings.

Now look at AIG, FNM, and FRE; they kept building their bases from March to July 2009 after an intial vertical rally in early March; it is called a pullback or a correction and a significant one. Naturally, after enough preparations had been made; the ensuing rally has a better chance of sustaining itself for sometime before the next major pullback or corrective action similar to the last one becomes necessary.

There is a good chance AIG will be able to reach the $62 to $75 range but highly unlikely be able to reach or break above $110 upper run rate limit before it will require another major pullback or correction that can last 3 to 5 months.

For FNM, the volume support of last week should be able to sustain further runs into the $2.26 to $2.67 range with upside limit of $3.40 before it will need 3 to 5 months rest. Volume should start tapering off as it approaches those upper ranges on the daily and weekly charts.

FRE and FNM are basically in tandem so they will rise and fall more or less in synch with each other on the daily basis.

It is very hard to make a bet against them when the volume of the last few weeks indicated impulsive runs rather than corrective C-wave run of a normal ABC upside correction or a bear rally or a bear flag as most traders call it.

Obviously, they are in a 1-2-3 Elliott Wave runs to the upside and will need 3 to 5 months of 4-th wave correction before they can execute the 5-th wave rally to complete the 1-2-3-4-5 basic pattern.

After that, they will need bigger, longer and perhaps deeper corrections that should not break the bottom lows in order to sustain further rallies into the years/decades ahead. You may call it resting or healing process or base building or a selloff or even a meltdown; TAs called them pullbacks or corrections. Necessary ingriedient toward building supports to sustain further rallies.

It takes time and time is the essence in such a dibilitating circumstance that should have bankcrupted them immediately.

So unless any or all of them cannot heal themselves and build enough bases in order to become profitable into the years and decades ahead; they have the necessary volume supports right here at this tentative bottom just by looking at their monthly charts.

Sobering Stat: ARMS Index Indicates Market Is at Peak, Not Bottom

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TRIN reading aside; the technical picture on both daily and weekly charts have significantly improved with the rally of the last 2 weeks.

Momentum indicators on both daily and weekly charts are indicating they can support further rallies. Short-term Elliott waves analysis also supports further upsides. Longer-term,; EW analysis points to lower lows. But that is the nature of TAs; short term can be bullish but long term can be bearish until proven wrong -- and vice versa.

The monthly chart is still significantly bearish and is still trending down using the basic ADX indicator.

The SnP500 is now projecting a target of 1063 to 1075 within the next 2 weeks if the bulls can sustain the rally using Elliott waves analysis.

Minor resistance is at 1043 which is the 2x fibonacci price projection on the daily chart of the June to July correction and a major resistance at 1055 which is the monthly 20ema that is trending to the downside. We don't know if those resistances will work or not until the bull/bear battles had been completed at those levels.

For the bears; it is very hard to make a reasonable technical analysis since there are lots of strong supports below such as the daily 20ema support which is now trending; the 1018 support which was tested last Aug 27; 956 which is the last high of June. We can also add the daily 50ema, the daily 100ma, the daily 200ma supports, etc. There are also a plethora of fibonacci retracement levels down there that can provide supports on both daily and weekly charts not to mention their own moving average supports. And the monthly chart has the 10ma which is being used by some TAs as initial support for long-term position holding in situations such as we had these last 2 years.

At the current stage; the highest probability is that any selloff or correction will be bought by the bulls or by those who failed to buy at the bottom and/or failed to fully or partially participate with the recent rallies since March 2009. Whether or not their combined efforts will prevent a potential meltdown and sustain the existing 6 months of rallies nobody knows for sure. But we can be sure, lots of those who had been left behind will take advantage of any pullback or correction.

For the armagedon'ers; here is the scenario just in case we drop like a rock from here: a normal target range of from SnP 721 to 635 with a maximum target of 524 under extreme conditions. These targets will have to be adjusted depending on when and where the expected "big" correction actually start to happen and sustain, if at all.

So the possibility of SnP going to 500 or lower as the major doomers have been "preaching" goes into the low probability scenario.

There is a very small window of opportunity for the bulls as of Friday or Aug 28 to execute the next rally, so they will have to do it early next week. Until then, we don't know what the next move will be for the bears. The bulls are holding the ball right now.

A Summary of Q1 Bank Earnings: World, You Just Got Hustled

There will always be half-full and half-empty fundamental analysis. There will always be buyers and sellers with contrasting analysis of the markets.

But the banking sector was able to have an 85.33% haircut going from $121 down to $17.75. What do you call it? It cannot be called half-full nor half-empty. It is more like a dry towel already. And this author is trying to short the financials again?

I bought the financials as it goes from 80% to 85.33% discount as it approaches my maximum target of $16.85. It is not so often that the glass becomes almost empty rather than just half-empty. Well, $BKX was not able to reach it's maximum lowest target but rather made a turnaround at $17.75. Now, it is still have a lot more room to run to the upside even at $42 or so price levels.

Do you know that $BKX was able to form a 1-2-3-4-5 pattern on the weekly and daily charts to the downside during the last sell-off iteration? It is a high probability bottoming process used by bottom fishers for precision entry.

Do you know that the $BKX has successfully broken out of a potential inverted Head and Shoulders pattern on the daily chart. Another high probability bottoming process used by those who try to chase the rally.

InvHnS has a probability rate of 65%. 65% probability rate is very high - you don't want to go against such an odd with your shorts more likely to be squeezed hard you might not be able to know what hits you.

Why not short AIG again at the current price of almost $2.00? It might go back down to 33 cents again and you will gain more than 80% profit on your trade. The trend is your friend, right?

Meanwhile, those contrarian traders who bought AIG at 33 cents are now up almost 500% on their trades.

Who is the greater fool getting hustled down here at these extremely depressed prices? The trend traders or the contrarian traders?

Banking Reform: Value for Value

Yea right, tell that to the banks when they were panicking way back Jan to Oct 2008. And the government who was trying to stem the blood flow with one hand tied to their backs also practically in panic mode as the crisis unfolds in real time with no proven viable alternative solutions. Maybe there was, but nobody in-charge really knew what the future holds. Nobody has the practical experience on how to solve this "economic crisis of the 21st century while it was unfolding". Do you?

Who would have thought of a viable solution at those times when George Bush was on the way out and an ignoramus Obama campaigning his hearts out, not because he would want to solve the unfolding economic crisis, but in order to change the 7 years of Bush policies? Neither Obama nor McCain knew what was happening to the economy when they staged their face-the-nation debates - while ordinary people were so evidently hurting badly at that time. The government was dysfunctional while the credit crisis was unfolding at unprecedented speed.

Is this not the first time in capitalism's history that the government acted pro-actively against an impending economic collapse? They have no prior experience on how to do the job!

Value for Value - when you have been given enought time to think about it. Enought time to hear everybody's side of the story. Hindsight is a blessing, is'nt it? Does it solve anything at the time when a solution was needed?

Would you ask your son first that he would not go swimming again far away from the seashore and that he will have to mow the lawn every Sunday for 2 months as penalty -- WHILE HE WAS DROWNING?

Value for Value from now on and into the future. No exception?

Are we out of the woods yet?

How Much Risk is the Treasury Really Assuming from Financial Institutions?

Big business for the 4 mentioned banks.

The United States practically has a cartel in derivatives. They control the whole world.

China will control the consumer products for the next decades if not for the whole 21st century.

Japan and Korea have taken up the automobile business.

Is there any ocean frighter ever built in the US for decades now?

Taiwan and India are now trying to gang up on computers, computer components, and software production. Who knows, Intel and Microsoft might lose their global dominance in a few decades time. The United States will become a net importer of technology if not already doing so.

Without the banking and finance sectors; the United States will be left with high-end military hardware and software exports as a sole source of income - the global merchant of death?

This newfound potential source of tremendous profits (and losses) has shown it's promise and peril within less than 2 decades.

The complexity of these instruments will prevent many nations from wrestling the market away from the US with ease.

And since most of those securities are based on trust; the United States will have to show the whole world they stand by it's products come thick or thin.

Extremely risky at best. Highly profitable at most.

Like the airplane, nobody would want to fly in an airplane. Now, air travel is almost as indespensable as car travel.

Magellan was never expected to come back trying to prove the world was round instead of being flat. He would certainly had fallen off the edge after several years of absence.

I think there is no other country in the world capable of handling such a risky venture such as the derivatives.

No wonder the government is doing everything within it's powers and means. They must have seen the future of the USA and it does not look good being just a merchant of death the whole world can depend upon.

An Unconventional Option - Go Long Financials

No problem mate!

During the bull market, we developed ways and means to make money. Volatility was low, the trend was up - sell naket puts. You can make the same 5 to 10% profit in a year same as what most investors expect of their long-term positions.

Now, this is a very different environment. Far from what we were used to. Volatility is horrendous. Volatility can kill you in both ways in more ways than one. We struggle to survive and possibly make money in this terra incognita.

Look, the stock markets are close to if not already at the bottom. Volatility goes berserk. Citigroup went from $1 to $3.89 in two weeks - 300% price appreciation in 2 weeks while an investor who makes 10% during the bull run in one year will be too happy of the result, 30 years to make 300% when investment is not compounded.

Look at BS, AIG, FRE, ABK, MBI and other companies that got crushed in the early stages of this market meltdown. They were able to appreciate more than 2x during the time when their bankcrupcy potential were at their heights.

BS jumped from $2 to $13 in two or three weeks when their "bankcrupcy or take-over" was announced. AIG jumped from $1.25 to $5.70 in 1 week when Paulson took over nationalizing AIG. FRE jumped $0.25 to $2.95 when Paulson used his bazooka. ABK jumped from $1.04 to $10 in 2 months when most analysts have written it down to $0 value. Wamu and WB died with nary a whimper. Part of taking the risk. So far, rewards were more than ample against the risks.

Those were the early days.

Now, we have lots of companies in dire distress. Lots of companies are going go bankcrupt sooner rather than later.

The result so far is that a TON of them were able to run 2x and in some cases up 5x during this last "bear rally". Citigroup, BAC, GE, and a lot of no-name companies such as OMX, ODP, ESLR, JASO, EK, DAN, LEA, TEN, CBAK, TXT, are among others I was frantically buying as SnP approaches my target of 600 level. SnP ended up bouncing up with this "bear rally" at 666. So many other names I was not able to enter such as AFFX, AYR, BGCP, CENX, CVO, HLX, JNS, etc. Most of them were able to run more than 2x.

Many were also able to do so too during the Oct 2008 bear rally and the Nov 2008 to Jan 2009 bear rally. DRYS was able to ramp up from $3 to $17 from Nov2008 to Jan2009. AMR was able to "bear" rally from $5 to $12 in Oct (I was playing AMR since July) and many other names that were able to make more than 2x run up.

There are some dogs too such as EXR. I got crushed on CC, GM is both a success and a failure, F proved to be a success since Nov and still a success. PIR dumped me and resurrected me back to life, same with LVLT and AA.

Short the stocks and you may have to provide stop loss provision of 300% - stupid and nobody will do that. Provide less than 100% stop loss provision and you will be taken out in a hurry.

You will never be able to make more than 100% profit on your capital shorting stocks per trade.

Sell the puts and you make 50% profit over extended period of time? You have to put up margin requirement for the puts so money goes unavailable for other opportunities?

We never have this kind of volatility before - we may never ever have it again in our lifetime.

Trick is to use volatility in order to gain more than 2x price appreciation. Sell half or 2/3 or 3/5 of positions in order to gain at least $0.00 capitalization on the remainders. Hold the rest and never look at them again until after 3 to 5 years before selling them. Nothing to worry about; they go UP, so much the better; they go bankcrupt, SO WHAT?

Buy stocks or ETFs such as UYG, FAS, DXO, etc. using divergence buy signals on the daily. At these levels, who cares about stop losses anymore. Use stop loss or buy puts while buying during a bull run not when the massive sell-off is almost done already.

Time to invest. Buy quality stocks to hold for at least 5 years.

Use trading techniques on high risk beaten down companies in order to gain zero capital investments. Why take too much risk on these "dying" companies? The potential upside, likewise is so huge, it is almost impossible, at least for me, to ignore.

Seven Uncomfortable Predictions for the Economy

All of the above scenarios have already been discounted and priced-in by the markets - and some more, a lot more.

Where are the stock market now? - Down the Drain.

What has not been discounted are the following (only the ones I can think of):

- The backbone of the US economy, which is corporate America, is still relatively healthy (or should i call unusually resilient?) despite all the doom and gloom we have had suffered for more than 18 months already. How many big companies have declared bankcrupcies during the last 18 months? How many should already have declared bankcrupcy during that period of extreme economic stress?

- The US demographic situation is still relatively much better than most other developed countries such as Germany and Japan due to immigration. There is still a healthy balance of new breed young population to replace the future retiring baby boomers.

- Look out of the window. See, China is now in the cusp of economic Revival. Their economic rescue plan is working, and working beautifully. Their stock markets have been on the rally mode with 75% gains since Oct 2008 while the rest of US and Europe had been digging new lows.

Likewise, India, Hongkong, Taiwan, Korea, and even the Philippines, and to some extent Japan and Australia among others; are following the Lead of China.

That can mean one very important thing: China is growing a New Breed of local consumers and the other developing countries are following China by not depending upon their exports to the US and Europe for the sake of their own economy.

The US can and should take that brewing opportunity in order to re-envigorate it's export industry. It is never too late, it is never too soon.

Soon, the tables will be turned with the US doing the export to BILLIONs of new breed consumers in the developing countries as they pursued their course of action of becoming developed countries similar if not equal to Western standards.

This is not a mirage. It is going to take decades - which means decades of opportunities for the US with 300 million population to be able to export to BILLIONs of new breed consumers in the developing countries.

The collapse of US consumer spending only added impetus to hasten such eventuallity.

What else can prevent such an eventual course of economic history that has been progressing for more than 20 years - - World War III?

Exclusive: Big Banks' Recent Profitability Due to AIG Scam?

Responsibility and Accountability are sorely lacking in corporate America.

This is just another example, true or not, of the public perception of corporate America - Little Empires controlled and abused by their CEOs and higher ranked company officals.

This has been going on for decades, has'nt it?

Enron, WorldCom, BS, LEH, AIG, etc. are the fallouts of excessive powers entrusted to the CEOs and their minions.

Rick Wagoner's ouster should be the catalyst for a chance to start disciplining corporate America's Little Empires.

It comes at a great cost to taxpayers' money. But who is going to do the cleaning of this corporate mess if the board of directors of said Little Empires have become the puppets of the CEOs?

How Bailouts Are Messing with Capitalism

We are still in the blame game business and trying to solve current problems using the old ways: Bail out ailing companies with public purse or slash and burn by nationalization or straight bankcrupcy proceedure.

Why not use Public-Private funding instead of the above?

An FDIC sponsored and supported Economic Recovery Re-investment Plan.

This can be achieved by the government providing initial capital (let's say $1T) and the private sector providing another $4T for bailing out distressed companies not only the financials but also other companies in the other sectors of the economy.

Let's face it. There will be more distressed companies in the near future and they will keep on increasing in numbers and magnitude with mounting unpreventable bankcrupcies and spiraling unemployment until the economy can no longer sustain such loses and goes into unmanageable major dislocation that is going to threaten capitalism, the government, and even democracy itself if not arrested pro-actively at the present time.

But investors are not going to take the risk in such an extremely unpredictable economic environment in order for new re-investment capital to plow back into the economy and prevent further job losses and/or generate new jobs needed for an economic recovery.

The government has to establish an Economic Re-investment Bank.

Private companies and individuals can deposit (invest) into that bank. The gov't can use those deposits to bail out companies that are facing liquidity issues. Excess capital can be used to jump-start new promising businesses that may crop out of this economic crisis as new needs are going to surface out of this highly uncertain times.

There will be No interest payment on those deposits (investment) and a minimum holding period of 5 to 10 years is required.

Deposits are Guaranteed and Insured by the FDIC for the same period. Nobody is going to take the risk of bailing out distressed companies without government guarantee.

But, as soon as those companies become profitable, they are going to allocate proportional amount of net profit before tax back to the Bank. Likewise, any dividend those companies provide to their common shareholders must also be enjoyed by the Bank and it's depositors.

After 5 years minimum; Depositors (or rather Investors) can withdraw their funds together with the accumulated profits - if there is a profit, there will be no guarantee of any profit during and after 5 years.

Profits must not be subjected to capital gains tax nor dividend tax. Tax free and tax exempt. Quid-pro-quo.

The government makes profits on this Private-Public re-investment plan with their own $1T seed capital. Also the government will make more income through increased tax collection as the economy recovers. Better than nothing.

This is not a risk-free proposal. Privated depositors are still facing possible collapse of the Bank if the whole plan fails and the economy goes into unmanageable meltdown. Capitalism, the Government, and Democracy itself might get irrecoverably damaged as this economic crisis kept on worsening at an increasingly prolonged period of time.

We are now in the 19th month and counting starting Oct 2007. Time is not a friend with this mounting problems that are getting worse by the minute.

The time to act is now while the chances of success are still favorable rather than later when things got into Do or Die situation.

This proposal is going to end right here and now the public outcry against government using public money in order to bail out distressed companies.

Prevent civil unrest from escalating into a rebellion as the government finds itself quagmired into desperate monetary bailouts as the only means to prevent a major economy dislocation.

Use money from willing investors to bail out distressed companies instead of forcibly taking them away from reluctant tax payers.

Geithner's Financial Reform Is Doomed to Fail

How about a capital deposit guaranteed and insured by the FDIC with no interest and with a minimum holding period of 5 to 10 years?

Anybody can participate - including those who would like to risk their "extra" cash but without the capacity nor the capability to analyze the whole economy and the stock markets and have no means in order to participate in the potential upside rewards.

An FDIC sponsored Economic Re-investment Bank.

FDIC can use those deposits to bail-out troubled companies not only the financials. No interest, but if and when those trouble companies recover, they will allocate a certain portion of their net profit before tax proportional to FDIC fund vis-a-vis company capital. These profit will in turn be returned to the FDIC Re-investment Fund with each individual depositor or rather "investor" reaping the profits of their risk taking endeavor. The FDIC Fund should also receive dividends as provided by companies to their common shareholders/

Likewise, depositors of the FDIC Economic Re-investment Bank will not be subject to capital gains tax nor dividend tax but a simple 10% surcharge which may be considered as government service fee for the depositors of the Fund.

It is not without risk even with FDIC guarantee and insurance because the whole project might fail and FDIC may even go bankcrupt as a result of this endeavor. We know that the whole economy, capitalism, the government, and even democracy itself are at risk in this unprecedented economic crisis that may or may not result in civil crisis and/or political crisis the US has not experienced in the past.

BUT, without government guarantee, we can be assured that investors, specially the small to medium sized investors are not going to risk their limited capital in bailing out distressed companies specially those in the brink of bankcrupcy.

Likewise, with the government so intent on bailing out distressed companies with reluctant tax payers; the potential for civilian rebellion against the government and it's actions will start escalating as the Fed and the gov't pursues this desperate course of action with more vigor in order to prevent unmanageable economic dislocation.



On Mar 27 07:27 AM capitalisthero.com wrote:

> Here's the solution. No FDIC insurance on interest bearing accounts.
> This will make the depositor perform the necessary due diligence
> to weed out the bad actors. FDIC insurance will be allowed on checking
> accounts.
>
> If you want to give the bank a loan so that it can make additional
> loans then do at your own risk.

Geithner Regulates: After the Carrot, A Stick for Banks

Regulators and their constituents want regulations. Punish the wrong-doers. That's what they want. Give it to them.

Simple logic - close the barn door when the horses are gone? Close it anyway, does'nt matter. Just close the darn door! And chase back those horses, we have a reconing to make!

To my logic; Strick regulations must be implemented during, and not after, the markets are in irrational bull run in order to prevent commission of crimes and other excesses of capitalistic greed.

During extremely stressful recessions such as these days; regulatory forebearance should be a better solution in order to prevent even viable companies from going bankcrupt thus further agravating mounting unemployment rates.

Some regulations must be implemented right now in order to plug the gapping loopholes that can threaten economic survival such as the CDS giant loophole that is wide open for further abuse.

But for forcing financial institutions right now to provide adequate reserve capital while the economy is in dire straights and obviously needs lots of fresh capital in order to prevent further erosion and be able to stage a recovery is counter-productive.

Give them some breathing room to recover, tightening the noose right now will only suffocate them.

The Financial Supermarket Is Dead

This is the height of pessimism on banks. Time to buy.

Global trade or global marketplace have changed dramatically from the 1930's. Hence the requirement to repeal G/S act.

Nothing has changed. The global marketplace is still the same as 2007 before this global downturn. China is still the dominant manufacturing center of the world. India still dominates software production. Taiwan is still the dominant computer parts manufacturer. Russia still produces oil, Japan is still the leader in auto-manufacturing. etc, etc.

The global marketplace did not suddenly returned back to the 1930's status where only a few western countries dominate global trade and emerging countries did not return back to their pre-third world country status. Cars and airplances are still the major mode of transportation instead of steam ships and horse carriages of yesterdecades.

We still have the economies of developed countries and the developing countries operating as of a year or two before albeit at greatly reduced capacity instead of full bore. Their economic engines did not disintegrate beyond repair. And if they do, they will be rebuilt based on today's standards rather than the 1930's standards.

What changed is the western world psychology of profligate living as their few hundred millions baby boomers start entering their twilight years.

The 1.5 billion of baby boomers in the developing countries such as China and India have not changed. They are still as optimistic of the future as they are before this downturn. They are young and relient while we are getting old and hard headed. Stop looking inwards and look out a few thousand miles beyond our horizon and the picture is not actually as dire as ours. Then look back from beyond our horizon and we will see our losses are paper losses, we did not have a grassroot revolution similar to the onset of communism in China where everything and anything considered "modern" at those days were demolished and destroyed and never to be repeated for decades. We are not living in communes and municipalities and using our own hands to feed ourselves off the land.

The developing countries have started attempting a decoupling in the last few years from the western countries; they cannot succeed in a mere 5 to 7 years to wean out of decades if not centuries of dependency on the United States and England. But they are going to increase their efforts of economic decoupling in the near future as they realize much more starkly how their dependency severely affects their economies. It is going to take decades. Plenty of years ahead.

Megabanks served a purpose in a cohesive global marketplace of the 20th century. The whole world is not going back to the 19th century - and so are megabanks. Much like supermarkets serve their purpose in our modern day lives. Are supermarkets going to be dismantled too? We built too many of them, trim the fat not remove all flesh from the bones.

Most likely, they are going to modify their business structure in order to mitigate the domino effect of one or more parts of their operations severely affecting the whole structure.

The Economy, And Why It's Taking So Long to Fix It

303820:

Americans are now penny pinching. It is only natural for us to think of today and not tomorrow while everybody is losing their accumulated wealth at an unprecedented rate.

You are very right. Spending $800B to save 3 million jobs gets the OK since it will go to the majority of the population while everybody seems bent on preventing $30B to go to the auto industry that is supposed to forestall a couple millions of lost jobs is penny pinching at it's best.

GM bankcruptcy, if it goes the wrong way, posess' massive threat to prolonging or exacerbating the recession or depression we are headed into with or without the $800B stimulus package.

UAW excessive health care is still the main cog in the wheel. As of now GM is an auto company specializing in health care. Is GM the biggest health care company in the world or what? Will it be the legacy by which UAW will leave to the Americans the whole world will be talking about for decades to come? An ignominous ending for the once proud American industry.

We have to remove that blockage in order for the wheel to turn around. Either the UAW helps to remove or dissolve the cog or GM and/or the govt will have to open the engine and/or dismantle the engine in order to remove the cog. A very expensive process but may be necessary.

When the whole country is in pain. UAW will have to share that pain.

The Economy, And Why It's Taking So Long to Fix It

Despite the doom and gloom the United States is still getting the better hand out of this global economic crisis and the still being forecasted "potential" global political crisis.

The United States is the biggest exporter of "high-end" manufactured products - meaning military hardware and software. As the economic crisis deepens, more countries will start getting more cautious of future potential global political crisis and will allocate more of their GDP into defence - hence more exports for Uncle Sam.

If and when we get out of this economic crisis; the United States' megabanks (JPM, WFC, BAC, and C) assuming all of them survive, are well capitalized to take advantage of the global recovery programs that will sure to follow. Uncle Sam will again be the premier financier of the world as more money will be spent on economic recovery rather than on military defence or war deterence efforts.

We are still in the prevention of economic meltdown or catastrope with stimulus packages and bail out packages all over the world the main focus of monetary allocation.

The best thing the US can do to prevent global re-allocation of GDP into defence or war deterence as they would like to call it is for the US to start slashing down it's own military budgets as an example to all countries of the world. This is going to forestall most if not all future plans for stepped-up military spending by smaller countries who needed their income more for economic recovery rather than for military defence.

The less money going into military the more chance of a faster global economic recovery.