WASHINGTON, July 12, 2012 – Short think piece today, as we’re booked to entertain visiting out-of-town relatives at our place in nearly West Virginia.
The market pretty much followed our Fed Day prediction yesterday. While opening down, it quickly shot up (which is what we predicted) based on the usual early optimism favoring more monetary pump-priming by the Fed. The market then began a long swan dive, really jumping off the cliff after the Fed’s 2 p.m. report did about what we predicted, essentially holding off on any definitive QE for now. Then, as the close drew near, some HFT buying and position squaring goosed the market off its lows, although it still closed down significantly, making that five down days in a row for the Dow.
What’s probably going on here is the usual large-cap-dollar-reaction syndrome. Mainly, given the Euro’s own recent swan dive vs. the dollar, markets on some level are perceiving forward weakness in product sales by the big multinationals, as dollar-denominated goods become more expensive, particularly in Europe where people are less and less able to afford goods anyway. For this reason, there’s some rationale for discounting the big boys right now, and those big boys, by and large, are the industrials that inhabit the Dow Jones Industrial averages.
This kind of slow erosion is what we’re likely to experience at least through Election Day as Congress will refuse to do one single thing to help the economy between now and then, leading people to wonder what we’re paying these idiots the big bucks to accomplish. True, House Republicans (and five brave Democrats) overwhelmingly voted to repeal Obamacare yesterday, a noble but futile gesture.
Such a vote needs to be vetted in the Senate as well by a veto-proof majority which won’t happen, as Harry Reid’s feckless Democrats spend most of their time these days playing cards, joking in the Senate cloak room, and drinking beakersful of single-malt scotch in various Capitol Hill watering holes. Or at least we think that’s what they’re doing. They certainly aren’t voting on any legislation, most particularly a budget. God forbid that endangered Senate Democrats approach this fall’s elections with anything resembling a voting record they might have to defend..
Increasingly, the Federal government is beginning to resemble the rise and fall of St. Louis’ ill-fated Pruitt-Igoe project. That human disaster story was the subject of a 2011 documentary entitled “The Pruitt-Igoe Myth” which the Maven chanced to view on Netflix last night.
For those who’ve forgotten or those who never knew, Pruitt-Igoe was the most notorious example of a Federally funded urban-renewal low-income housing project, many of which became fashionable in the years following the Second World War. To make a long story short, roughly 56 acres of St. Louis slum dwellings were bulldozed to make room for the construction of a massive, high-rise housing project whose modernist buildings boasted every modern convenience, plus abundant public space and plenty of sunlight streaming into each unit.
The 1952 project was briefly a success, a real paradise for low-income families accustomed to living in squalor. But, for a variety of reasons the film discusses, the project went into rapid decline, transforming in the process to a horrendous, murderous, decaying drug and death emporium whose buildings soon deteriorated beyond their ability to be maintained. Starting in 1972, the last of the residents were moved from the complex, which was gradually imploded and razed.
The films and stills taken of the implosions remain iconic records of government’s massive failure to deliver on the promises of a large and complex project. Our still here should serve as a graphic reminder of taxpayer funded government overreach, which is certainly germane to what’s going on with the economy and with healthcare today.
Today, the entire Pruitt-Igoe acreage is still barren, populated now only by scrub and mature trees, abandoned perhaps forever. Is this a metaphor for what’s happening to our government and our democracy? Perhaps it is, and perhaps we’d ought to think long and hard about this as the market slouches toward November awaiting either rebirth and renewal, or death by a thousand tiny cuts.
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