Market Talk

I’m not a pessimist. But I get pretty cranky when my car dies in the driveway, my son gets sick, when the person on the bus behind is gabbing on their cellphone, when the financial system drops an atom bomb on the economy that we’re still dealing with, when the central bank plays God with the markets, when companies wrap themselves in the flag and then ship jobs to China, when politicians from both parties wrap themselves up in the flag and then take millions of dollars from the companies shipping jobs overseas, and then rewrite the rules to favor the companies shipping jobs overseas, when…

Well, you get the picture. I consider myself an optimist. But I am also a realist, and I have to tell you, right now, realistically, everything stinks.

Okay, you got me; not every single thing in the world stinks, and like the New York Knicks, everything that stinks can get better. It may take a major upheaval, a revolution or exiling Justin Bieber to Inner Mongolia to make it better, but it will get better.

Now, if you’re a player, a real player, a Koch brother or Jamie Dimon, then everything’s great. But, for the rest of us, here’s just a partial list of everything that today stinks. Tell me if I left anything out.

The economy stinks. We are not creating anywhere near enough jobs, which means we’ve got millions of people stuck on unemployment, and millions more who are employed but are seeing their wages and benefits undercut by the lack of demand. We have a completely shot-through housing market. The list is endless. We will be lucky, and I mean David-Tyree-catching-the-ball-against-his-helmet lucky, to avoid another global banking crisis.

Stocks stink. I don’t want to hear about bull rallies. The market is largely controlled by computers programmed by pros who can suck all the value out  of a stock 200 times over before you even get near it. The average investor does not stand a chance, not a chance, of getting real value out of the stock market.

Bonds stink. The Federal Reserve has been driving down interest rates in the interest of driving investors further out along the risk curve, into, say, stocks (and commodities.) Where you’ll get crushed by the quants and bots. That’s not even factoring in default risk. I’d go so far as to say that today, there is not a single safe investment for the average person. Not one.

The Republicans stink. Poppy Bush had it right when he blasted “voodoo economics,” but nobody in the party listened, we had 30 years of “supply-side economics” that led directly to an all-time economic crisis. Republicans stink.

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Stocks have been getting quite the lift from both the election cycle and the Fed’s loose money policies, while mixed economic data have been just encouraging enough to keep the bulls contented. This allowed stocks to craft a technical break-out, and sans some game-changing bit of news, it may hold through at least election day.

Hold is about what they’re doing today; futures up a hair on a relatively quiet morning. Wal-Mart offering $4.6B for South Africa’s Massmart and Unilever in a deal for Alberto-Culver. Dallas, Richmond Kansas City Feds post regional surveys this week. Chicago PMI on Thursday. Final reading on 2Q GDP comes Thursday, ISM manufacturing survey comes Friday.

S&P 500 futures up 1.30, DJ futures up 16. Ten-year yield at 2.55%, euro’s flat at $1.3492, although it was weaker earlier.

I opined on Friday’s News Hub that the election cycle, and the Fed, were driving things here, and there’s an article in today’s Journal that bears out at least the former. We’ve been hearing for some time that traders are looking to the election, and the widespread notion that the GOP will take back at least one or even both houses of Congress. E.S. Browning says, in fact, the market is already pricing it in:

Investors are debating whether the November election will have an impact on the stock market. Actually, it probably already has.

In election years, the stock market typically hits a roadblock in the first half of the year, as investors worry about the looming vote. But money managers typically are looking three to six months ahead when making investment decisions, and by summer they are forced to start looking past the November vote. Much of the election rally can take place before the outcome is known, as investors worry less about the looming election and focus on the coming year.

The thinking on the Street seems to be that the GOP is more business-friendly, for one thing, and will act as a counterweight to the “anti-business” Obama administration (although it’s beyond me how any party that would front that monument to appeasement called the Dodd-Frank Bill could be described as “anti-business.”) Maybe. But this isn’t necessarily a moment in history that will benefit from gridlock. If the GOP, which apparently stands for “Glenn Or Palin” these days, just grinds Washington down to a halt, we will be even worse off for it.

Miller Tabak’s Dan Greenhaus makes the point:

We cannot envision gridlock being good for markets or the economy at this point in time. Will there be a halt to some policies the market perceives as harmful? Of course. But with the economic realignment ongoing, the country would be served by a rectilinear and somewhat unified Congress. We hope that the decision making process becomes more unified from here, but the probability of such unification remains less than absolute.

I’m not saying the Dems have all the answers; Lord knows they don’t. But this idea that a Republican victory in November is going to be a panacea is just so much GOP pablum.

- An increase in temp hiring is usually an early sign of recovery, but that trend hasn’t lived up to expectations, so far, in this purported recovery, Financial Armageddon blogger Michael Panzner says.

- EU appears to have a financing package in the works for Greece, but the “main goal seems to be to buy time — hoping for better global outcomes — rather than dealing with the issues at any more fundamental level,” Peter Boone and Simon Johnson write.

- Even as Google (GOOG) continues to grow and faces further antitrust scrutiny, it in no way deserves an Italian court conviction of three executives for privacy violations, Kara Swisher notes. Lesson: don’t get into any legal tangles in Italy.

- Asset allocation looking trickier ahead. “This isn’t a shock, but more of it is probably coming, meaning that a new set of challenges await for managing asset allocation relative to the trend for much of the past 12 months,” James Picerno says.

- “The Republican base is fired up. The Dem base is packing up,” says Robert Reich, former labor secretary in the Clinton administration.

- Apple’s (AAPL) iPad availability may be limited for its expected launch later this month as production delays could lead to tighter inventories, Digital Daily blogger John Paczkowski says.

- Credit default swaps are more toxic than most realize, Yves Smith writes at naked capitalism. “The more we can to contain this product the better, but I am afraid it will take another meltdown to teach us the lesson we should have learned from the last one.”

- “Is it any wonder that Republicans have suggested the bailout of Fannie and its sibling Freddie Mac ‘will almost certainly be the most expensive of the financial crisis’”? FT’s Alphaville says. “And given that the other contenders to that dubious crown include AIG and the US car makers, that’s saying something.”

- AOL continues its radical remake, selling Buy.at – an affiliate marketing company it bought two years ago – to Digital Window. “Another marker in [CEO] Tim Armstrong’s campaign to undo just about every part of the old regime at AOL,” Peter Kafka writes.

- Corporate insiders are sending fairly positive signals about the market, NYT says.

- The best journalism in 2009.

Can you spare $12 trillion for an American down on his luck?

A few weeks ago, sitting in as a guest on Fox Business’ web show in the morning (sorry, don’t have the link,) we were talking about the $30B President Obama proposing spending to spur small-business growth. After saying I doubted it would work, Connell McShane asked me what I thought they should do with the money. “Put it toward the debt,” I said.

Connell, playing devil’s advocate, said something to the tune of aren’t most people arguing the opposite, spend money now, and worry about the debt later. I don’t think I had a very good answer to that, to be honest. I was surprised by the push-back.

There are two kinds of deficit hawks these days: people who use the national debt as a crutch to beat the current Democratic administration and Congress over the head, and people who are genuinely concerned about the national debt. I put myself in the latter camp.

It’s not an easy place to be; I don’t want to be lumped in with the Sarah Palin fanboys. But I really do worry that our $12 trillion debt, not even counting the unfunded mandates, or the states’ deficits, is something that needs to be addressed immediately. Not because the other party isn’t doing it, but because the long-run consequences are gut-wrenching changes.

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This is repulsive:

Seeking to tap into growing anti-establishment discord among voters, the Republican Party is actively seeking candidates who have never before held elected office.

Bruce O’Donoghue owns a company that makes traffic-light systems; he is challenging Florida Democratic Rep. Alan Grayson. Jon Runyan, a former player for the Philadelphia Eagles and San Diego Chargers, is running in southern New Jersey.

Mind you, nothing about trying to figure out just what it is that’s got the electorate so cranky. Just figure out a way to capitalize off it. I guess we’ll have to wait until these rookies get into office to learn if they’ve got a clue, or if they’re just a bunch of muppets.

This is the most craven, worst political pandering there is, and it shows how the Republicans flat-out do not care about the nation’s problems. They just want power back. And don’t think the Democrats are above this little game. The whole anti-establishment wave started with Barack Obama, who was a little green to be running for president, but who cared? The kids liked him. Back to the Journal:

Running political newcomers is a proven strategy when the political tide swings drastically toward one side, and at times when voters have soured on Washington in general. In 1994, when Republicans won a majority of House seats after four decades in the minority, 55% of the party’s 73 freshmen lawmakers had never held political office. Similarly in 2006, when Democrats took control, 45% of their new lawmakers had never held office before.

Chris Russell, campaign consultant for Mr. Runyan, called 2010 a good year to be running as an outsider. “I don’t want to overstate it, but people hate politicians,” he said.

No, it’s not politicians necessarily. It’s the parties. And if these “outsiders” are just the new cogs in the same old machine, expect another year, or two or three, of nothing getting done.

A more honest time?

It’s amazing to me, and so clearly illustrates the problem, that an “unscripted” meeting between President Obama and a group of vacationing Republicans is getting such notice. From the Times:

BALTIMORE — President Obama denied he was a Bolshevik, the Republicans denied they were obstructionists and both sides denied they were to blame for the toxic atmosphere clouding the nation’s political leadership.

At a moment when the country is as polarized as ever, Mr. Obama traveled to a House Republican retreat on Friday to try to break through the partisan logjam that has helped stall his legislative agenda. What ensued was a lively, robust debate between a president and the opposition party that rarely happens in the scripted world of American politics.

The packaging of politicians has been getting progressively worse for 50 years, from the moment John Kennedy showed up looking better on TV than Richard Nixon to that outrageously overproduced moment on the USS Abraham Lincoln when President Bush declared “mission accomplished.” That President Obama and members of the opposition party sparred in an unscripted exchange the other day, the kind of water cooler debate that takes place every day at less elevated levels, is almost unheard of in this day of handlers, spin doctors, flaks and ad-men masquerading as “strategists.”

It would be nice if we could have a class of politicians that weren’t sold to us the same way we’re sold soda. We might even get a more honest group of representatives, one who aren’t so easily manipulated by moneyed interests. A guy can hope.

Movies, as you know, are fiction. Film is an actually illusion, a series of thousands of still images played at such a speed as to make them “move,” to make it seem as if what you are seeing is real. But it isn’t. The same production job has been done in Washington, and too often, what you are seeing isn’t real, either.

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Opportunity knocks.

Okay, we’re gonna get a little political here this morning. Don’t worry, I’ll be brief.

The surprise election of Scott Brown in Massachusetts to the US Senate has been widely viewed as a repudiation of President Obama and his healthcare reform plan, and possibly as a foreshadowing of this fall’s midterm Congressional  elections.

I always thought, and I don’t care what anybody says, that the Democrats’ focus on healthcare in 2009 was based solely on politics. They knew they controlled the White House and Congress, had a filibuster-proof majority in the Senate and could cram through just about anything. But they had to get it done in 2009. They might not survive the midterms, and nobody wants to be running for reelection amid a cantankerous healthcare debate anyway. No, it had to be 2009.

Not only did they not get it done, but the Dem’s wake up today like the Romans after the Visogoths sacked the Eternal City. How could they lose as safe a bastion of power as Ted Kennedy’s Senate seat? It’s a disaster, right? The GOP is probably already planning the balls for after the 2012 Presidential election (“congratulations, Madame President.”) But that would be premature, because an awful lot can happen in two years, or one year, or 10 months.

The  conventional wisdom is that 2010 could be a replay of 1994, when President Clinton lost his Democratic majority in Congress to a resurgent Republican party. The upset forced him to move politically to the center, from which he actually achieved a great deal. The problem with that scenario for the Republicans is this: they just gave President Obama his second chance, 10 months before they can make him pay for his mistakes.

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