What a difference a day makes! We have been discussing what a potential bail-out plan will do to the price of copper. But what we didn’t anticipate was that Congress would not pass the bail-out package hammered out over the weekend. And though we’re likely looking at a short term crash of many key commodities, according to this Bloomberg article, “the CRB Index tumbled 21.35 to 343.22, the biggest drop in data going back to 1956. The index has slumped 28 percent from a record on July 3,” the reality is the pain from not passing a bail-out package will far outweigh the political unpopularity of passing one.
I’m not going to profess any deep understanding of the intricacies of the world’s financial markets. But what I can say is this: yes, the banks have been eating too many french fries and haven’t had the need to exercise or diet. Why? Because they have been making record profits and there has always been someone to take the “hot potato”. But you can’t live on french fries forever. If we don’t unclog the arteries, the money will not flow through to those that need it. It won’t flow through to big companies with less then stellar credit. It won’t flow through to mid sized firms that buy the capital equipment from the big companies that many of our readers work for. The money won’t be there to help good companies that make innovative products grow. I’m afraid it’s too late to take Lipitor. We need to unclog the arteries and get this bail-out moving. Otherwise, we’re all going to feel a whole lot of pain.