Enough alliteration. Let’s talk business.

While I will never complain about a day that sends almost every position in our portfolio into the green, there are way too many red flags in the air for me to celebrate today.

Sure, the TFN Strategic Trader portfolio currently boasts six plays worth double-digit gains (47%, 44%, 50%, 10%, 29%… and 200%), but it’s a contrarian mix if I’ve ever seen one.

In other words, if our current portfolio is on fire (and it is), something is not right with the nation’s economy.

As with most things American, all we have to do is turn to The Donald for an answer.

Earlier today, Mr. Trump phoned his friends at CNBC. He had a bone to pick and he knew his the staff of “financial experts” – who gladly fill in when a Today Show gab is missing – would lend an ear.

Trump gets a lot of press time, but most of us agree the only thing he’s an expert at is bankruptcy proceedings. Taking his financial advice is like getting a clipping from a blind barber – another of Trump’s apparent flaws.

Sometime during the past few weeks, a bank must have looked at Trump’s credit record and said, “No way, Jose,” because the king of narcissism is angry at the banking industry.

He tells his audience that banks must be forced to lend more of that taxpayer cash they are sitting on. Trump believes the economy will never recover unless the banking sector loosens its standards and starts writing checks again.

Um, Mr. Trump, isn’t that what got us into this mess? Guys like you taking massive loans without a way to pay and then calling a bankruptcy lawyer.

Really, what could go wrong if we follow Trump’s advice and allow the government to force banks to lend?

Sure, most of those shaky loans will never get paid back and we’d be in a worse financial fiasco in eighteen months, but boy would it feel good now.

And there lies your problem. In a world where reality-show wannabes make front page news for embarrassing the White House and a golf star’s car accident gets more press time than Iran’s recent nuclear moves, it is all about feeling good now.

Who cares what tomorrow’s consequences will be? Somebody will bail us out. We feel good now.

It’s sad to say, but that’s the same logic driving the stock market these days.

Sure, the dollar is eroding fast, unemployment is above 10%, the national debt is off the charts, taxes are on the rise, and corporate earnings are stagnant, but dang it, it feels good to pretend it will be a “V-shaped” economy.

Anybody with half a financial brain knows it will all crash down someday, but too many of them just hope and pray that somebody will step in and fix it.

I know from the comments I received about my recent gold commentary, many Notes readily understand what’s to come. That’s why they are rushing to the “safety” of gold.

But let me warn you once again; gold’s recent run has as much to do with the nation’s feel-good-now mentality as the Salahis’ sudden rise to fame.

The collateral on both sides will not be pretty.

My advice? Go short. If it works for TFN Strategic Trader members, it will work for you.

*** With all of this talk about healthcare reform, Afghani strategy, White House crashers and gold’s 30% run, one industry has been greatly overlooked. And, once again, the action comes thanks to the folks in Washington.

The ethanol industry – which was recently plagued by bankruptcies and production shutdowns – is soaring these days as it awaits word from the EPA that ethanol allowances in gasoline could be raised from 10% to 15%.

Here’s a bit of what I told TFN readers earlier today:

“The ethanol industry is having yet another good day. After near political abandonment, the nation’s biofuel sector reeled from the pain of a wave of bankruptcy filings earlier this year.

“But now, thanks to some more political maneuvering the industry is once again finding itself on the leader board.

“Should you get used to it?

“Before we answer that question, let’s look at the catalyst for the action. Today was supposed to be the EPA’s deadline for a decision that would allow gasoline blends to contain up to 15% ethanol versus the 10% cap now in place.

“But word this morning says the EPA is not ready to make its decision quite yet. It now wants to make the decision by sometime next summer. Judging by the day’s pricing action, the Street views this as a positive sign.

“Companies across the industry are eager to push more of their product into the nation’s fuel source.

“One of the big winners today is Pacific Ethanol, the once highly touted California-based producer with subsidiaries in and out of bankruptcy court over the past year.

“Word that more ethanol production may be around the corner was enough for the company to pull the mothballs out of its Burley, Idaho production facility by January. The company owns a total of four production facilities, only one of which is currently operating.

“If the word from the EPA is positive, expect shares to continue to climb. As I write, traders are getting in (and out) at $0.87, up 56% on the day.

“Two more companies worth mentioning are…” To find out, keep reading here.

*** Finally, don’t forget about the question of the week: Is it a coincidence the weekly political roundtable programs air at the same time churches offer their weekly services?

We’ll discuss the various views on Friday.

So gold is now publicly loved by armchair investors, famous hedge fund managers and central banks… even as we write, Erin Burnett is “squawking” about it on CNBC. Are your contrarian senses tingling yet?

“So many hedge fund managers and pundits are singing the same tune: long gold and short U.S. Treasuries,” our friend Dan Denning wrote in today’s Daily Reckoning. “The bond bubble could go on much longer than anyone expects. And when so many people agree on something, none of them are usually right. As a contrarian, you’d be worried about becoming a victim right about now.”

Finish reading this article on DailyReckoning.com.

What a time to be part of such a popular, well-regarded newsletter. From what I’ve heard and read, Notes subscribers are some of the most-informed, thought-provoking readers anywhere. I sincerely look forward to opening a dialogue with all of you.

As you know, there has never been a more pivotal time in this country’s financial future than right now.

The dollar is weak.

The word “jobs” has become an atrocious four-letter symbol for economic despair.

The government owns Detroit, Wall Street and is desperately trying to get its hands on healthcare.

And, worst of all, China could eat our economy for breakfast.

Indeed, there will be no shortage of topics to discuss over the next few months.

But first, you are owed a proper introduction. I am hoping to get to know many of you through commentary and feedback, but before you can drop me a line, you have to know who you are writing to.

First and foremost, if you are looking for Wall Street flash, I’m not your guy. Far from it.

I’m not a Mercedes and gold watch kind of investor. In fact, I drive a pickup truck to the office and wear a digital watch that I bought on Amazon for $14 a few years ago.

When they were handing out made-for-TV personalities, well, I must have been out fishing that day.

That’s fine with me.

Too many folks talk too much and think too little. After all, what is talking? In most cases, it’s nothing but a bunch of hot air, especially in this game.

Like that bunch on CNBC. Don’t get me started. How a few headline reading clowns became the face of finance is beyond me. For most of them, it’s dissecting Wall Street in the morning and hocking OxyClean in the evening.

These guys won’t ever let facts get in the way of their opinion.

If you want facts, I will give you facts.

How about a market that is still 30% below its highs?

Or $80 oil in an economy that is screaming, “No mas!”

Or an American dollar that is weaker than Obama’s economic acumen?

Or a Fed Reserve with more power than any unelected board in global history?

I could go on and on about the subjects that keep today’s investors up at night, but what would we discuss in the coming days?

Like I said, there has never been a more pivotal time in the nation’s economic outlook. Even better, there has never been a time to be at the helm of a popular contrarian newsletter.

You are my kind of people. The thinkers. The realists. You don’t talk just to make noise. You think, then discuss. I am excited to see what we get into.

*** Now that you know a bit about me and the way I think, let me share some of my recent work with you.

As you know, the commodities market has been off the charts over the last eight months or so. Just about everything that can be pulled from the ground has soared in value as investors from across the globe have flocked to anything with a tangible value.

With a weakening dollar, the appreciation is understandable. With everything but natural gas, that is.

Natural gas is America’s fuel. The vast majority of what we produce is used within our borders, with very little demand contained in the export or import business.

Even though a nasty recession has significantly reduced natural gas orders, production is on the rise and prices have more than doubled in recent months. With natural gas reserves nearly full and the winter’s increased demand yet to show up, the markets are about to realize they made a horrific mistake.

Natural gas is unlike any other commodity. It has nothing to do with currency or global economic health, yet speculators treated it just like oil or even gold.

Bad move.

Traders are now paying for their mistakes.

Besides writing articles and commentary for TodaysFinancialNews.com, I am also tasked with running an options trading service called TFN Strategic Trader. It is a fast-moving easy-to-use options service that loves to take advantage of short-term market mistakes.

Less than two weeks ago, I lifted the curtain on my latest special report, an in-depth look at the nation’s natural gas industry. At the bottom of page 5, I listed three trades that offered triple-digit gain potential.

I admit, I made a mistake.

I said the gains would come by January 15. I was too conservative!

Already, two of the plays are up by 140% and 170%, with the third up by just 13%. Those two big gainers and one soon-to-be big gainer alone could easily make up for two years worth of market losses for investors still suffering.

But we are not cashing in yet. The best is yet to come. You can read the full report here.

*** The next few weeks and months are going to be quite interesting. I am not one to scream and shout, but let’s face it. Our nation and economy ain’t what she used to be.

Instead of protesting with a teabag or pleading with your congressman, I’d rather you protect your wealth, make you some more money and ensure that no matter what happens, the life you know is not going anywhere.

We’ll fight back, but not in any way they are used to seeing.

In fact, the rally appears to be overdone.  We have jumped too much, too fast.  Looking at the chart of the S&P 500, the daily stochastics have reached their highest level in two years thanks to this rally.

A closer look shows three significant hurdles for the S&P to overcome in the immediate future:

• The 200-day moving average is in the 958 range
• The downward-sloped trendline is sitting just above the 200-day
• The high from January- 943.85

Combining the three levels of resistance and the overbought state (both on the daily chart and the weekly chart), there is little chance of the S&P breaking through the resistance in the immediate future.

While I still think 2009 will be a positive year, a decent pullback will be healthy for the market.  The monthly chart shows that we are barely out of oversold territory.  We are still 100 points below the 12-month moving average that I have talked about using to time your asset allocations.

If you are a short-term trader and have reaped the benefits of this massive rally, I suggest you take some money off the table.  If you are a long-term investor, I suggest you wait before committing any additional funds to equities.

A move back down to the 800 level and some sideways movement for a month or two would give the 12-month moving average time to catch up and then we could potentially see the 6-month moving average cross back above the 12-month.  And that is when you will know for certain that the bear market is over.

Source: Proceed With Caution

The identity of the bank that is alleged to have failed the bank stress test was not revealed.

The bank-stress-test findings were reported yesterday (Sunday) by CNBC.com, which said it obtained the information from a source that it did not identify. The source did not identify the company, CNBC.com reported.

“At least one firm – under the [bank] stress test assumptions – will require more capital,” the source said.

The bank-stress-test results were contained in a two-dozen-page report that the government released Friday. But the results had already been “conveyed” to the firms, meaning the bank in question is aware of the U.S. central bank’s assessment, according to the published report.

This round of bank stress tests was essentially a two-step process. The first step – outlining how the banks have been analyzed – was taken care of with the report released over the weekend.  The second step – releasing the results to the public – will be taken care of when the actual results are released May 4, which is one week from today (Monday).

Neither the U.S. Federal Reserve nor the U.S. Treasury Department would comment.

The bank stress tests have a very specific purpose. Financial institutions that are found to have inadequate capital will have six months to raise the money via the private sector. If that doesn’t work, the government has said the financial institutions will be eligible for an infusion of capital via the federal government’s so-called “Capital Access Program.”

U.S. Treasury Secretary Timothy F. Geithner said he would be open to banks repaying their Troubled Asset Relief Program (TARP) loans, as long as the availability of credit (borrowing) was not adversely affected.  As a Money Morning special report detailed last week, the credit markets don’t seem to be loosening up: Lending dropped by more than 20% from October 2008 to February 2009, despite initiatives to encourage such activity.

According to the conclusion of the report released over the weekend, “most banks currently have capital levels well in excess of the amounts needed to be well capitalized.”

However, as Money Morning has reported, the tests have become a “no-win” situation for the Obama administration.

“There are two things that are terribly wrong,” William M. Isaac, the Secura Group chairman who served as head of the Federal Deposit Insurance Corp. (FDIC) from 1981 to 1985, told CNBC.com. The first problem – and a big one – is the fact that the details were announced at all.

“I can’t imagine what Treasury was thinking when it made that move. It has been causing incredible angst in the markets,” said Isaac. “The second big problem is that the Treasury is directing the stress testing, apparently with direct involvement of the White House at the highest levels. Bank regulation by law is supposed to be carried out by the independent banking agencies without any political interference.”

Market Matters

As Money Morning reported Friday – in a Wall Street version of the old “he said/(s)he said” drama, Bank of America Corp. (BAC) Chairman and Chief Executive Officer Kenneth Lewis claimed that ex-U.S. Treasury Secretary Henry M. “Hank” Paulson Jr. and central bank Chairman Ben S. Bernanke threatened to remove him from office if he backed out of the Merrill Lynch & Co. Inc. (SQD) merger or (publicly) discussed the mounting losses.

Paulson had previously testified that Lewis must have misinterpreted their comments, but then seemed to blame Bernanke for the threat (Translation: Paulson tried to throw Bernanke “under the bus.”).

New York Attorney General Andrew M. Cuomo has been investigating the activities surrounding the merger to determine why shareholders were kept in the dark about the financial “challenges.”

Shifting to autos, Italy’s Fiat SpA (OTC ADR FIATY) emerged as a potential major global player as it attempts to forge a partnership with (soon-to-be-bankrupt?) Chrysler LLC, and also has interest in buying General Motors Corp.’s (GM) Opel unit. Meanwhile, GM will be closing 13 production plants over the summer to trim inventory and seems likely to miss a $1 billion debt payment due June 1 as it too moves closer to bankruptcy protection.

How bad is GM’s plight: GM may close its Pontiac division after 82 years of operation, The Wall Street Journal and MarketWatch.com reported over the weekend.

While the earnings news of the week found plenty of winners and losers, ultimately analysts perceived a bit of “cautious optimism.”  Bank of America and Morgan Stanley (MS) failed to live up to the favorable showings by Wells Fargo & Co. (WFC) and other financials, though techs like Texas Instruments Inc. (TXN), Apple Inc. (AAPL) and International Business Machines Corp. (IBM), beat Wall Street expectations, and brought new hope that the downturn was nearing an end. (Watch for an updated “Hot Stocks” feature on IBM here in Money Morning later this week).

Unfortunately, Microsoft Corp. (MSFT) posted the first quarterly revenue decline in its 23-year history, though investors still cheered its ability to reduce costs during these challenging times for PC sales. McDonald’s Corp. (MCD), AT&T Inc. (T), and Ford Motor Co. (F) were among the diverse group of companies reporting better-than-expected results, while United Parcel Service Inc. (UPS), Caterpillar Inc. (CAT), and Continental Airlines Inc. (CAL) issued disappointing numbers.

Amazon.com Inc. (AMZN), the subject of a recent “Buy, Sell or Hold” feature here in Money Morning, bucked the negative trend facing many retailers and posted higher quarterly earnings and revenue.

Additionally, U.S. retailers J.C. Penney Co. Inc. (JCP) and Coach Inc. (COH) each expressed positive sentiment that sales activity seems to picking up.  Oracle Corp. (ORCL) snapped up Sun Microsystems Inc. (JAVA) for $7.4 billion after IBM chose to pass, and PepsiCo Inc. (PEP) is attempting to purchase two related bottling companies as corporate execs seek favorable deals in this environment.  Such merger-and-acquisition (M&A) transactions often signal boardroom confidence and also indicate that the “worst” part of a downturn may be over.

Oil prices surged above the $51-a-barrel level late in the week as traders overlooked the higher inventory levels and instead focused on some favorable signs that the economy may be closing in on turnaround mode.

With a six-week winning streak on the line, investors offered their best “clutch hitting” late Friday, pushing all major indexes to higher levels. Early in the week, after investors digested negative news from the likes of Bank of America and GM, prognosticators said the weekly stock-market winning streak was all but over. However, some better-than-expected earnings and economic reports brought out the “bulls” for one final run.  The Nasdaq Composite Index ended the week in positive territory, and the other equity indexes were virtually flat from last week’s closing levels (with the Dow Jones Industrial Average suffering a slight decline).

Economically Speaking

According to the International Monetary Fund (IMF), the global downturn will be far worse than previously expected.  For 2009, the IMF expects the world economy to contract by 1.3%, its first such decline in 60-years, with over 10 million employees losing their jobs.  Unfortunately, its projections for the United States are even more dire (-2.8% for the year), with domestic financial institutions suffering $2.7 trillion in losses, almost twice the IMF’s prior estimates from just six months ago.

While much of the economic data of the week confirmed the IMF’s weak projection, analysts found a few positive signs that the downturn very well may have bottomed out.  While both new home sales and durable goods orders declined in March, the results beat the weaker Street expectations and came in the aftermath of some (relatively) strong February numbers.

In another promising sign of stability within the housing sector, the median price of an existing home sold in March actually rose for the second straight month.  Still, the record unemployment filings last week revealed the ongoing difficulties facing job seekers amid these tight labor conditions.  Likewise, leading economic indicators, a predictive report, dropped for the third consecutive month and many economists expect the recession to last at least until late third quarter.

Weekly Economic Calendar

Source: Controversial Stress Tests Reveal Only One Bank Needs Capital, but Worries Remain

It is hard to reconcile the sunny optimism of CNBC with the grinding reality of the stock market. Where will earnings and growth come from in 2008? What sector? If inflation is out of control, are shares the best refuge? The stock market looks more and more nervous as investors try to sort all these things out.

The grim news Stateside is that the board of directors of Wachovia, the fourth largest bank in America, fired its CEO Ken Thompson. Wachovia lost US$708 million in the first quarter of 2008. It didn’t help Thompson that he engineered the acquisition of mortgage lender Golden West Financial in 2006—right at the peak of the mortgage lending bubble.

Thompson joins a long list of CEOs falling on their sword for thinking a credit boom would never end. It has. It’s still ending, in fact. Ratings agency Standard and Poor’s lowered the credit ratings of three big Wall Street firms earlier today. JP Morgan, Lehman Brothers, and Merrill Lynch were all downgraded because the S&P reckons the firms will have to take further asset write downs this year.

What did you expect? It’s a bear market in credit. The story comes straight from the department of news so obvious a rock would know it. What does it mean?

Well, a bear market in credit is bad for firms with heavily leveraged balance sheets. That includes most financial stocks. Why any investor would go bottom fishing in the financials when we still have a bear market in credit is beyond our feeble Tuesday-morning reckoning capabilities (still jet lagged).

Turning to our adopted homeland, we notice that other people are starting to get really worried about inflation. “Inflation rising at record rate,” reads a headline. “Inflation is rising at its swiftest pace on record,” according to a survey by TD Securities and the Melbourne Institute. You don’t say?

The RBA reckons inflation is running about 4.5% a year. It’s probably even higher than that, especially for people that eat, drive, get sick, and wear clothes. Hunger striking nudists who commute to work on bicycles are probably doing just fine. If there were only more of them.

There are comments by the usual morons on TV that the U.S. dollar is headed for a rally against the euro and the yen. This, the morons reckon, should lead to some “easing” in commodity prices. Oil eased itself up US$1.48 in early us trading, getting back on the north side of US$128. Gold eased itself up US$7 to just shy of US$900.

What if the dollar goes up against other currencies, but down against tangible assets? Is that even possible? Well of course it is!

The greenback weakened even more against oil and gold in the last few years than it did against the euro and the yen. Beware the false prophets of a dollar resurrection. They are looking at an incomplete picture because it’s more comforting.

How will shares behave if the global inflation bush fire becomes an inferno? Well, resource shares could melt up. The weak dollar is responsible for a lot of the nominal gains in commodity prices. But it’s not responsible for all those gains. Demand is too; especially demand from the 3.2 billion new industrial consumers in India and China, and the billion more in the next wave of industrializing countries.

We’d better be careful though. If people begin to think the central bank fight against inflation is lost, they will modify their behavior accordingly. This includes demanding higher wages to keep up with spiraling prices. And it includes trading cash for things before things get more expensive.

You’d be surprised how quickly the shelves of a supermarket can be picked to the bone when people become convinced (and afraid) that prices are going inevitably higher. There is probably not that much difference between the human genome and the locust genome.

Buy extra toilet paper.

And here’s a note we’ve been waiting to see. “Deal nears on iron ore price rise of BHP, Rio,” reports Jamie Freed in the Age. It looks like the Aussie miners are going to get something like a 95% increase from last year’s contract price. The Chinese steel makers won’t be happy about that. But if they don’t agree to a deal before June 30th, both Aussie ore titans are free to sell ore in the spot market, where prices are double the current contract price.

You can find more share market news from our pals over at Money Morning, who are all over the coal-seam-methane story. Until tomorrow…

Dan Denning
The Daily Reckoning Australia

Source: It’s a Bear Market in Credit

The fact is that ever-rising energy costs will alter American driving and dietary habits with no government intervention at all. $7 gasoline (or $12, now that Robert Hirsch of Hirsch Report fame has repeated Charlie Maxwell’s $12 forecast on CNBC) will make the 40-mile one-way commute unsustainable. And to some degree, we already see this reflected on a nationwide map of foreclosures, county-by-county, as put out by RealtyTrac.

In the places where foreclosures are highest, writes Wall Street Journal columnist Holman Jenkins (yes, I know I excoriated him a few weeks ago, but this most recent column isn’t half-bad)…

…Many of these homebuyers are underwater not just
because they bought more house than their incomes could support, and
not just because prices are falling. They were also betting on commute
patterns and demographic expectations that are proving invalid.

These were bets on location, location, location –
premised on the idea that people would be willing to live hours from
anywhere for a chance to own a single-family home they could actually
afford. No federally sponsored haircut can put these housing bets back
in the money, or stop these houses from coming back on the market at
distress prices.

And the reason for that, although Jenkins doesn’t say so, is that rising fuel costs are making the exurban lifestyle increasingly unsustainable.

So let’s examine the map as Jenkins did. The worst of the bleeding is in an arc reaching from Sacramento to Vegas to Phoenix, plus a goodly chunk of South and Southwest Florida, plus the tier of counties just east of I-25 in Colorado.

Now Florida’s a peculiar case; so much of the malinvestment there went into second/vacation homes. But that big Western arc sure looks like an unconscious bet that car culture would last forever. And it’s especially true of those Colorado counties — cheap land on the plains east of the Front Range, where housing was more affordable than in Denver or Aurora or even Fort Collins. It was a wonderful thing — as long as gas stayed under $2.50 a gallon.

Looking at the lighter shade of bleeding reveals more problem exurban areas — like the region 40-50 miles southwest of Chicago, including Kendall County, home to 77% population growth between 2000 and 2007, highest in the nation. Much of the state of Ohio is in the pink as well, including the I-71 corridor where new arrivals made long-distance commutes to Cincinnati and Columbus de rigeur during this decade. The parts of Florida that aren’t in the red are mostly in the pink, including the I-4 corridor that would likewise be unsustainable without cheap gas. (Can’t afford Tampa or Orlando? Move to Lakeland or Winter Haven and commute. Seemed like a good idea at the time…)

I don’t necessarily buy into all of James Howard Kunstler’s near-apocalyptic predictions about what’s in store during the Peak Oil era. But the map tells one part of the story that’s undoubtedly true: there’s a whole lot of fairly new housing stock out there, 40 or 50 miles from major cities, that’s being steadily abandoned… and may never be occupied again.

Source: An Ominous Map

Last Wednesday, a bunch of peeved mortgagees protesting government favoritism in the Bear Stearns case entered the lobby of the company’s (soon-to-be-former) headquarters building in midtown Manhattan. While it might not seem like much, I view the symbolic “penetration” of this corporate stronghold as the very first sign of a much broader citizen revolt against the extraordinary protections being shown to crapped-out investment banker boyz – at the expense of millions of equally crapped-out poor shlubs facing the default and re-po of their McDwelling places.

Occupying an office-building lobby peacefully in broad daylight is one thing. Wait until summer gets underway and The New York Post gossip page resumes its coverage of hijinks in the Hamptons. The executives of Goldman Sachs, J.P. Morgan / Chase, and other dealers in fraudulent securities, plus the art world and show biz glitteratti who party together out there, might all find themselves the object of considerable grievance and resentment as the beaching season ramps up, and the limos roll around the charity lobster roasts, and the guests stray down the lawns, chardonnays in hand, to plot divorce from their over-leveraged husbands…. God knows what seekers-of-vengeance will be creepy-crawling the privet plantings along Gin Lane in the crepuscular gloom, searching for trophy wives to garrote.

Perhaps a bankrupt landscaping contractor from Lake Ronkonkoma, recently stiffed by a hedge fund manager over the installation of a half acre of pachysandra, will be arrested on the Wantagh Highway with blood on his sleeves and a high-C piano wire in his pocket. The non-Hampton precincts of Long Island, which make up more than 90 percent of the fish-shaped appendage to New York State, will be full of angry repo victims, and the Hamptons lie at the very dead-end tail of the geographical fish. Will the banker boyz attempt to flee by yacht? And where might they escape to? Newport, Rhode Island? Labrador?

I maintain, of course, that the media (and the public itself) has no idea how quickly things might get weird in this country – or how weird they might get.

Now bear with me while I shift gears. [Recently,] I went to a pretty major environmental conference put on by the Aspen Institute in their odd little mountain town – and nobody needs to tell me how un-correct it was that I flew all the way out to Denver and then drove a rent-a-car the size of a humpback whale deep into the heart of the Rocky Mountains to attend this thing. (I assure you, I wasn’t paid to go.) The Institute grounds – which looked like the set of a 1950s Raymond Massey movie about the future – were thick with many eminentissimos of Climate Change (minus Al Gore) and activists in “green” politics, more generally. The latest frightful measurements of retreating glaciers, vanishing species, and creeping deserts were proffered and everybody was suitably impressed by the acceleration of scary conditions facing the human race.

Being such a formal conference, though, with the putative mission to advance understanding and set agendas-for-action, a great effort was made through the medium of panel discussions to set forth various “initiatives” to deal with all the scariness, especially by enlisting the agencies of the U.S. government – and most especially with the prospect of a new administration sweeping out the detritus of Bush-dom next January.

I confess I found most of these well-intentioned proposals utterly implausible, along with their trains of hopes, wishes, and fantasies. The main conceit is that we can keep all the normal operations of the American Dream humming by some “non-carbon” related energy source – in other words, run Wal-Mart without oil, methane gas, or coal – and that all the forces of government and capital can be marshaled to make that happen. The secondary conceit is that they would accomplish these things in an orderly process, harnessing “new technology,” as though it were a higher sort of school science fair.

My own opinion is that these birds have the scale issue wrong. The exigencies of the Long Emergency imply that virtually everything organized at the grand scale will tend to wobble and fail as the problems of energy scarcity and climate change converge. Institutions from the federal government to Wal-Mart to the University of Arizona will face increasing impotence, incompetence, and bankruptcy. Vesting our hopes in propping up activities run at that scale is bound to be disappointing, to say the least, and the precursor to social upheaval to go a bit further. There’s probably a lot we can do at the finer and more modest scale, but that is not the scale that conferences like this focus on – in particular because so many of the participants are current or former high-up government wonks themselves. Anyway, the scale of global distress tends, by plain inference, to invoke the wish for global “solutions,” however detached from reality they may be.

At the center of all this conferencing was the movement’s lead eco-guru, Amory Lovins of the Rocky Mountain Institute (RMI), located just up Highway 82 from Aspen. Lovins’s long-running emblematic project with that outfit is something they call the “hyper-car,” a car that gets such supernaturally great mileage that it will save the human race’s threatened Happy Motoring program from extinction. The hyper-car program, which RMI still trumpets to this day, has, of course, the unintended consequence of promoting future car dependency – which is about the last thing that America needs – but that hasn’t prevented RMI from pushing it. Beyond that, Lovins’s RMI program-for-America resembles an actuarial exercise in “carbon credits” and other statistics-based fantasies aimed at inducing theoretically rational behavior among the Wal-Mart executives (and “greening” up Wal-Mart has been another of RMI’s consulting projects – I’m not kidding).

Here lies my third dissent from what I heard at the conference: since America is bankrupting itself so comprehensively at every level, the wished-for “funding” for the green rescue program will not be there in any case. Capital, as represented by Wall Street, is itself flying to pieces this year as its stock-in-trade of paper certificates loses legitimacy in the face of the overwhelming fact that the society behind that paper will be decreasingly capable of producing surplus wealth – which is what capital is. The unwind of “positions” now underway among the big bankz is the process of previously anticipated capital accumulation vanishing down a black hole. It will be gone forever.

This is the year we find that out. Bear Stearns was not the only sick puppy in the kennel. When another one wobbles and crashes, will the Federal Reserve step in again and accept its worthless CDO paper as collateral on another $30 billion loan, and another, and another, and so on? And will the individual mortgage default homeowner shlubs just watch all this go down on CNBC without any action beyond “penetrating” the lobby of a Manhattan skyscraper? I don’t think so. What goes down in the Hamptons will go down in Aspen, too.

Regards,

James Kunstler
for The Daily Reckoning

Editor’s Note: James Kunstler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine. In 1975, he dropped out to write books on a full-time basis.