WASHINGTON, August 15, 2012 – Recently announced Republican Vice-presidential hopeful “Paul Ryan represent(s) Obama’s most horrifying nightmare: math.” This recent comment in the Twitter-verse by veteran blogger Iowahawk has gone viral. The reason why: it brilliantly crystallizes what’s gone wrong in both Washington and New York, and what it’s going to take to get things back on track. Assuming we’re not already too late.
What Election 2012 is boiling down to is this: for four years, the U.S. economy has been in the tank with virtually no signs of recovery in evidence even though we’re told that things have gotten better. Maybe that’s true for the mega-banks and investment banks that, along with their bought-and-paid-for Congressional supporters, have not really suffered one whit for their fiscal sins. But it’s demonstrably not true for the middle class taxpayers who’ve bailed out Washington’s and Wall Street’s thieves while sinking beneath the fiscal waves themselves.
Making matters worse, massive taxpayer-supported bailouts and bribes for the Democrats’ union supporters have been enabled by some actual taxpayer funds but also by a much larger, far more massive amount of Federal borrowing for which future taxpayers, in particular, will remain on the hook for the rest of their natural lives.
The middle class, both present and future, has been completely hosed by this administration and its rich, crony capitalist friends even as the Obama campaign purports to be the only possible Divine Savior for the hapless and shrinking members of the petit bourgeoisie. That’s borne out in today’s poor reading of the New York manufacturer’s index, which went negative for the first time since last fall. It’s an indication that growth—and the jobs it could create—has halted and is probably headed down.
Meanwhile, “seasonally adjusted” inflation was allegedly in check last month, but you’d never know it from the prices people are paying for stuff. As one witty commentator over at Zero Hedge notes with ironic gratitude: “I’m glad inflation is in check. I’m sorry that it costs me a lot more to drive to the grocery store where cat litter jumped from $3.39 to $4.69 a bag.” The Maven has noticed the same thing here as the family bravely struggles to maintain Anja the Cat in the comfortable lifestyle to which she has grown accustomed since her adoption this past spring. And kitty litter is the least of our concerns. Have you checked the price of meat, veggies, and petrol lately? Who cooks up these inflation numbers anyway? Probably the dudes who bring you the unemployment numbers, “seasonally adjusted,” of course.
All this continues to create uncertainty for those retail investors—darn few of ‘em—who remain in the markets. Meanwhile, those hedgies who aren’t yachting in and about the Hamptons, Connecticut, and Rhode Island (including Massachusetts’ Senator John Kerry, who prefers to dock his costly vessel here rather than paying Massachusetts taxes) are trading lackadaisically if at all, allowing the algos and HFTs to play with daily headlines, causing thin markets to move in ways that baffle fundamental and technical analysts alike.
It’s likely to stay like this pretty much ‘til after the elections, we’re afraid, with the only likely catalysts to the downside. That includes the growing possibility of an Archduke Ferdinand-style international trigger that could cause major fuel disruptions in the Middle East. Most investors, it would appear, are dodging that possibility by remaining in cash while on vacation. The only “safe” place to be if something like this happens, is gold. But no one except George Soros seems to be interested in this metal lately either. Are central banks dumping or shorting gold as a way of gaming currencies? Could be, but no one is telling.
Many market indicators topped on Friday, so caution is the watchword this week. The market is actually overbought at this point, and the HFTs are probably probing for an excuse at this very moment to take the averages down, so let’s resolve to stay out of their way.
What to do? Even our beloved utilities and REITs are going wobbly on us this week, as the few remaining bulls seem to be shedding them in favor of riskier assets. But that doesn’t seem very smart, given everything else that’s going on. Probably time to lean back and brush up on your math skills. Come this fall, they might come in handy.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
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