Unfortunately the bigger picture is many of the themes I have been stating [Et tu, 1st half 2008? Predictions for the coming 6 months] are all coming together. Employment was the last leg the bulls had to stand on - i.e. well if jobs hold up we will come out of this in a few months. And instead of listening to what the companies are saying, the people saying this are the ones using these faulty government reports. The same government who tells you inflation is 2-3%. And these will be the same people clucking like chickens today saying we need 50 basis points of cuts, NOW! Because that won't make inflation go up even more. I just find the whole song and dance amusing. These are the same folks who won't agree a recession is here until the government numbers tell them 6 months after the fact (i.e. next summer/fall)
Now even more interesting news is this Bush meeting with the Plunge Protection Team (i.e. the invisible hand)
- President George W. Bush will meet with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke tomorrow as he considers whether to announce a new economic stimulus package amid slowing growth.
- Bush will speak to reporters tomorrow after a 1 p.m. meeting at the White House with members of the President's Working Group on Financial Markets, press secretary Dana Perino said today.
- ``It will be a number of weeks before the president makes a decision'' on a stimulus package, White House spokesman Tony Fratto said. ``There will be some additional data coming in the next few weeks, and the president has said he won't make any decisions until it gets much closer to the State of the Union'' address on Jan. 28.
- The administration ``will do what we think is appropriate to continue to foster economic growth,'' Ed Gillespie, senior counselor to the president, told reporters Jan. 1. ``There's more to be done, we think, on the housing front to address concerns people have.''
- This will be the first time in his presidency that Bush has met with all members of the financial working group, Fratto said. Normally, Paulson briefs the president on the group's activities, he said. The team meets formally about once a month, Fratto added.
What do the bulls have? The Plunge Protection Team. And the Federal Reserve. So if you are confident that a government that cannot solve our most basic issues in this country will now ride to the rescue with the next round of plans, you have to be a raging bull. Because we can look forward to more proposals, more Fed cuts, more talk of 50 basis points, and more talk of "we need it now" (intrameeting)
And if this is the market I know and love, the people will eat it up like kool aid and push up the market on any action because the "government has our back". And we will bounce. Just like we did when Bush made his first mortgage proposals in August, just like the 2nd round of proposals by Paulson for mortgages in December. Just like the first Fed cuts, just like the second Fed cuts, just like the third Fed cuts. They all helped right? (no) Remember, these are the same people who told you "it's contained", "it's just a subprime issue", "keep spending" "nothing to worry about" "financial innovation is the backbone of the USA" "please go out and use these fancy new mortgages" "we are a homeownership society, let's get everyone into a home". And the Street trusts these people? I find it fascinating. But all that matters is sentiment. And apparently this Wall Street still is of the mind that the Federal government, in all its glory can engineer away the business cycle. And this folks is the bull case. And why you cannot be overly negative because of such 'sentiment'. It does not matter if has no place in reality. Or we have a gridlocked government that doesn't pass anything except for farm aid bills, and budgets chock full of pork barrel. The minute Bush mentions his stimulus in the State of the Union we can rally! woo hoo. Or maybe this afternoon at 1 PM!
Anyhow, this was all predicted....
I expect a lot more programs to "save" the banks, save the poor homeowners, save everyone. More government programs, more bailouts, more money printed out the wazoo at the Federal Reserve, perhaps a surprise cut here or there, perhaps a major discount rate cut. I've said at 2:31 PM Halloween when the Fed signaled they would go back to neutral, forget about it. We are going to mid 3%s by spring 2008 on the Fed funds - the more I see, the more I could be conservative. Maybe low 3%s or 3% by summer 2008. Anything and everything will be on the table to bail out the economy into an election year. That's just the reality folks. The long term be damned, whatever course of action is needed to be taken will be taken.
The fact is we are a reactive nation, not preventative. And now all the kings men will ride together to 'fix' the economic cycle. And it will fail. But as long as Wall Street can be made happy for a few more days/weeks, we clap like seals at the coming announcements.
Last, I think last night's elections speak in part to the utter disgust with the political system. We want anyone, who even appears to speak as a straight shooter. I just sit here amazed to hear the punditry coming out of NYC and Washington how so few there can understand the angst in the country when the 'aggregrate economic reports show a booming economy'. How clueless.
