WASHINGTON, March 21, 2013 – Once upon a time, global events, political moves and legislative changes provided what was called the “fundamentals”, upon which stock trading was largely based. There was a time when a foreign country collapsing, or one of the largest cities in the United States going bust would signal a predicable move in the market.
Those days are over. Welcome to the new normal.
Thanks to the plunge protection team at the US Treasury coupled with a complicit federal reserve, risk has evaporated from the market. The only businesses that you should probably avoid are ones where president Obama has made a personal appearance touting a recovery; they have a bad habit of closing their doors for good not long after.
The US Treasury has become nearly indistinguishable from the big banks anymore, as leadership between the two is a revolving door. Jack Lew, our newest Secretary of the Treasury got a big fat bonus ($940,000) from Citigroup the day before they received $45 billion in TARP money, so I figure he owes them big-time.
I’m thinking that Citigroup is a pretty safe bet.
Besides that blatantly obvious choice, there is a new set of fundamentals these days: the best news you can get is bad news.
Any event or news story that would normally signal the sell-off of a particular stock, buy it quick. I mean real quick. Forget the piece-of-junk “super” computers they use to forecast things like global weather patterns and seismic events, algorithmic stock bots are conducting millions of trades over a span of a few milliseconds.
These highly sophisticated machines, with even more sophisticated software are able to place bids, place derivative contracts leveraged at about a million-to-one, cause any stock they want to go up a few cents, cash in the derivatives profit and then sell the stock at a profit on top of that in less time than it takes to blink.
But they do that just for fun (and perhaps a new yacht). Their real job is recognize any negative move and throw our tax dollars at it to (at worst) keep the price steady, but it has become obvious that gains will be made in most circumstances.
The federal reserve’s monthly conclave ended today with a plume of green smoke, signaling that they will print money until we run out of trees. Not only will they print, either physically or digitally, but they will use billions to quickly correct any dips in the stock market.
The stock market is the only economic indicator that is easily visible to all of us, and therefore must, under any circumstances remain headed upward.
This is great news for those on the receiving end of nearly endless “free” money. (Lamborghini sales were up 50 percent last year in the US)
If you happen to be on a fixed income, whether you know it or not, you are the one buying those cars and yachts. Every dollar they print in a zero interest policy environment is a dollar you are not gaining in interest on your life’s savings.
The other indicators are easily obfuscated. For instance, the housing report for February indicated a very respectable “sounding” 946,000 permits issued for new construction.
I do not know how the talking heads can keep a straight face when they know quite well that the unadjusted (uncooked) number of housing starts was 66,700. The data is right here in case any of them are simply unaware and only read the state approved teleprompter rhetoric: Stay calm and spend money, borrow it if you have to, just buy stuff.
Cyprus is on the verge of financial ruin, but I would be shocked if it actually happened. The US has pumped over $400 billion into the European union over the last 5 months. Between December 26 and January 16 alone we handed $174 billion in cash to European banks. (page 18, line 25) The risk of systemic collapse within the Euro and its potential to cross the pond would only cost us $15 billion or so, therefore there is no point in taking the risk.
Why the drama then? We must become acclimated to the concept of capital controls and capitol seizure. They cannot simply spring it on us, we have to become accepting of the fact that there “is no other way” to prevent whatever crisis Washington cooks up next.
You and I are the only ones not too big to fail. Get used to it.
This article is the copyrighted property of the writer and Communities @ WashingtonTimes.com. Written permission must be obtained before reprint in online or print media. REPRINTING TWTC CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.