WASHINGTON, Sept. 27, 2012 – Yesterday’s market behaved about the way we thought it would, with prices trying to sustain a mini-rally, then plunging as we drew nearer to the close as the sellers, short-sellers, and assorted algos and HFTs traded away to the downside on headline risk from Europe and practically everywhere. The Chinese were alleged to be moving into stimulus mode, but, like the Europeans, you can never trust what you hear coming out of that part of the world.
ETF Digest, a service to which we subscribe, has an area that’s free to non-subscribers where the site’s friendly, veteran proprietor, Dave Fry, about summed up the reasons behind the present inaction:
“The big market boost from ECB and Fed QE may have run its course for now. Perhaps the best we can hope for now is to just churn about here barring more poor results. The Draghi & Bernanke Puts should underpin markets but sometimes you just can’t overcome the bad news with money printing. Even Bernanke said the Fed has done all it can and now we await the election and the path forward with whoever wins. Whoever wins won’t have an easy job given a lack of political consensus.”
As we’ve been preaching here before, we think it’s time for people to lay off Ben Bernanke, BTW. (Even Dave hammers at the dude.) What Uncle Ben is doing—endlessly priming the pump with borrowed or printed money—is probably something he himself doesn’t really want to do. Or at least not to the extent he’s doing it.
But, since politicians here, in Europe, and (believe it or not) don’t want either themselves or their crony capitalist buddies to pay for their sins by turning in their swell lifestyles and helping the republics they robbed, they continue to kick the can down the road, financing it with a level of debt that will make our grandkids commit mass suicide once they grasp its scope—as well as their inherited responsibility to pay it off. So what we see are endless promises of “solutions” that will never happen. Currently, the Greeks and Spaniards are, umm, revolting. It’s the right answer in a way, but their targets are responsible adults, not the real perps.
Europe’s “solution” is probably more transparent than most. Euro-socialist pols want Germany to pay war repatriations for the third time in one-hundred years in order to finance the lazy, profligate lifestyles of everyone else. When the Germans balk at accepting this, they become the “obstacle” to the solution. At this point, the Germans ought to move back to the deutschemark and tell everyone else in Europe to go to hell because that’s where they’re all going to go anyway. What a bunch of scoundrels.
And so it is in the kind of socialist world that Barack Obama is en route to building for us here in the States. (We certainly didn’t build that.) When things are good, it’s The Party’s genius at work. When things are bad (do to The Party’s malfeasance), blame it on everyone else and make a big show of taking their money away to solve the problem. (But not too much, lest you rob your Party’s own gravy train of re-election donations.)
Much of the world has become a victim of government-sanctioned Reverse Robin Hood Syndrome where you denounce the rich and then rob everyone else to sustain the lifestyles of the rich while everyone’s eyes are diverted by the political illusion. Weird that nobody seems to have picked up on this (save, perhaps, for the ghost of Ayn Rand), but there you have it. Stasis on the surface, horrible decline and destruction beneath.
Bernanke has seen this, particularly in current numbers, so is doing his best to keep the ship of state from collapsing entirely while begging Congress and the White House (in polite code of course) to actually DO something to stem the tide. He knows he’s pretty much used up all his ammunition and that this is it unless Congress—via the easily hoodwinked electorate—wakes up and begins the tough job of fixing things.
Which is what Dave Fry is essentially driving at above.
A better solution than the daily, risk free catharsis of blaming Uncle Ben (or Romney, Ryan, and the Republicans) is to put the blame squarely where it belongs on the Democrats and Republicrats in Congress and on the head of our Socialist President. Having done so, voters should next embrace the obvious and vote the President and all long-term incumbents of either party out of office in November. It’s the only way to upset the status quo applecart and re-establish enough political comity to begin the long crawl back to fiscal sanity. (That and sending the entire elite core of Jounolistas, sellout pollsters, and MSM blow dries out to the rice paddies to experience what real work feels like.)
But with a demoralized electorate whose salaries, wealth, and lifestyles are being steadily eroded into nothingness, it’s not clear that a majority will support draining the redistributionist swamp that Washington has become. It’s as if the majority has become too depressed to get angry about being robbed by a bunch of lazy, elitist twits.
All of which explains much of the current market meandering, actually. Aside from the algos and HFTs, remaining investors and institutions are sullen and resentful that our once vital financial markets have been destroyed by a bunch of corrupt elitists and overgrown video gamers.
Best strategies in a wary environment like this remain holding some gold as a hedge rather than a real investment; holding high-dividend REITs until the algos start pounding them down; nipping back into select, high-yielding utilities; and slowly peeling off most other positions, raising cash for a hopefully better day—or to pay your mortgage if the Fiscal Cliff becomes reality on January 1.
Or, better yet, let’s see if we can find Galt’s Gulch.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He is adding the gold ETF, IAU, to one of the portfolios and will increase the size of that investment over the next week or so .
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.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
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