WASHINGTON, June 19, 2012 – Yesterday was yet another strange day on Wall Street. “Wash, rinse, repeat,” once again. Averages opened down, staged a pretty nice rally, then closed virtually flat. Greece had elections. The Commies didn’t win. Yay. We’re bored. At least that’s what the market felt like as most stocks ended up barely moving the needle. But the private sector is doing just fine.
It’s just the algos and the HFT machines indulging in self-abuse these days, it seems. No one else seems to be playing in this rigged and dismal game. The always useful and world-wise blogger behind Jesse’s Café Américain noted that for him at least, “the key news [yesterday] is that NYSE volume was only about 600 million shares. No one with any real discretionary money is buying this ‘crisis averted’ story.” Jesse’s right on the money here, as he often is.
The reason for the modestly upbeat tone of this morning’s futures is that the Fed is holding it’s two-day meeting today and tomorrow and everyone’s expecting an announcement of QE-whatever (Quantitative Easing) by the Fed. The announcement will happen tomorrow at the close of the meeting, usually at two-ish. But that doesn’t keep those in the know (illegal, but who cares) from trading ahead of it. Where the market goes today and tomorrow is usually a pretty good tip-off.
The bulls are in fine fettle about this meeting, feeling that it’s the last one that can contribute any palpable help to the quietly but very slowly sinking prospects for the Obama administration in the November election. Theoretically, the Fed is supposed to be independent from election year politics. But Fed chairs do try whenever possible to support the guy who appointed them during an election year. Even if the private sector is doing just fine.
Although Ben Bernanke was originally a Bush appointee, President Obama backed him to the hilt during his controversial re-nomination, which finally managed to get through. So he’s an Obama guy now, albeit once removed. So the bullish thinking is that he will do his level best not to let the economy get worse than it already is, thus completely tanking job creation and the market, which would guarantee a November loss by his current patron.
Fed chairs aren’t always accommodative. Sometimes they have to choose between prudence and valor. Paul Volcker chose valor during the Carter hyperinflation era, helping permanently erase that already cursed presidency. And even that hyper-stimulative Ayn Rand aficionado Alan Greenspan didn’t help Bush I out during a brief recession until it was just a bit too late. The recession actually ended about 60 days before the 1992 election, but the initial effects of this—barely perceptible at the beginning as always—combined with third-party candidate Ross Perot to derail Herbert Walker’s drive for another term.
That’s what gave us Bill Clinton for eight weird but oddly happy years. For all the Slickmeister’s faults, which initially led to the first fully Republican Congress in—goodness, how many years?—he was able to come up with budgets every year, damage the Republican juggernaut a bit, and survive impeachment for perjury due to the distraction of an unlaundered blue dress. Mr. Greespan kept things juiced. And everybody (it seemed) happily ignored the 1997 “Asian contagion” and the 1999 dot-bomb that caused the recession that persisted into the early part of Bush II’s second term.
It was all very fun, really. Nearly everybody ended up getting to play with post-Gulf War funny money, right into the liar loans and resulting real estate bubble that have now destroyed the early decades of the 21st century for everyone except incumbent politicians and the Wall Street fat cats who love them.
Realism is called for today. But all we’re likely to get again this week is Ben Bernanke sticking another thumb in the dike (how many does he have?). The children in Congress have flunked sandbox for three years running. The child-man holding down the White House is fed up with the electorate he expects to re-anoint him as Executive Order King Barack I. And the entire Western political class continues to play ostrich with the catastrophe that their cupidity and lazy faux-socialist policies have caused. Meanwhile, the private sector is doing just fine.
So today and tomorrow might be fun on Wall Street, at least to the tune of 600 million shares, but things underneath still aren’t getting any better.
Jesse heads his blog-commentary homepage each day with the following George Orwell quote: “The most effective way to destroy a people is to deny and obliterate their understanding of their own history.” This happened in the U.S. a long time ago, courtesy of lefty Democrats (i.e., “progressives”) and the socialist-dominated education establishment. If enough Americans are around who still remember something of the past, November could be the start of a gradual U.S. revival. If not, even the Fed won’t be able to save the economy much longer.
We’re gradually rolling off our one short ETF, a position we put on late last week to guard our dividend-heavy stock portfolio against a Greek catastrophe that didn’t happen (this week). But otherwise, we watch and wait while the machines are at play. All in all, it’s a disgusting prospect, but we’re still looking for ways to make money in this mess and we’ll keep you informed.
Meanwhile, remember: The private sector is doing just fine.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
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