Senate Republicans did the right thing, voting to refuse cloture on the Detroit auto bailout bill. Unfortunately, President Bush plans to burn a few billion more dollars by loaning the auto industry enough money to get them to the Obama Administration, which should be ready to grant them at least $ 100 billion per year for the next few years to preserve a handful of UAW workers' pensions (that are a multiple of the pensions of ordinary taxpayers). Eventually either the US will own the Detroit auto business or it will go bankrupt or both. Detroit will never be able to compete with the likes of Honda and Toyota, as has been all too clear for the past decade or so.

Bernie Madoff has given the hedge fund industry another unwanted headline by announcing that his $17 billion hedge fund is nothing more than a "ponzi scheme." Many well-heeled friends of Madoff are no longer well-heeled, nor or they any longer friends of Bernie Madoff. I guess 1 percent a month is not really the risk free rate after all. Big surprise!!

Another great prediction for Barney Frank. He must be short the market. After the Senate voted down cloture, Frank opined that the stock market will show what it thinks of that (by crashing). So, it rallied. It liked it Barney. How do you like that? Who would you trust your money to....Bernie or Barney?

The inflation numbers were reported as negative. All of a sudden no one cares about the "core" rate anymore, which, by the way, was positive for both the CPI and PPI for November. But since deflation is a better story, we now report the total rate not the core rate. Back in the days when we were trying to minimize inflation we reported only the core rate, since it grew much slower than food and energy. Now, we want to pretend that inflation is dead, so we now ignore the core rate and focus on commodities that we know are going down in price -- food and energy. But, inflation is not dead, it is merely slumbering and will waken with a vengeance by late next year. Perhaps, we can enlist Paul Volcker to slay inflation once more as he did in the early 1980s.

Illinois politics will claim several victims before this is over and will bring Obama's relationship to Tony Rezko back into the open. Obama should be careful what he says. No doubt the wiretappers know a lot at this point and my suspicion is the Illlnois Governor will be happy to take a few folks with him when he heads for federal prison. This is an unfortunate development for the country. Obama will not gain from this unseemly episode in American politics.

Bearishness seems to be overwhelming now. Its probably time to back up the truck.