Tomorrow Is September
Tomorrow is September. Where did the summer go? I remember when this meant school was starting once again. While Economic Disconnect has always been a scientist at heart, he also hated having to go to school for a year to learn stuff he could have finished in 3 months.
This September should be important for things economic. The whole crew return right after the holiday weekend:
-Wall Street Traders
-Other folks who checked out for the summer
This can lead to price swings and more importantly this year, a Congress that really needs something to happen to change election chances in November. Note I mentioned no party as either would be in the same boat at this point and I doubt very much current policies would have been any different either.
I would say "the next big thing" (TNBT) should be known by the end of September, maybe mid October at the very latest. What is that going to be?
At this point I think most anything is on the table. A cornered animal is always very dangerous and we have two to deal with; An on the way out congressional majority and top policy makers (FED/Treasury) with out much to show for plenty of wasted money. Both could admit they were wrong and change course, but instead I imagine they will double or triple down on the giveaway plan. There never was a plan B, remember?
The best way to do something you want to is to rationalize it. Via Tim Iacono we see Paul "The Krugmonster" Krugman making bond market observations on why spending has no limits:
The bond market is telling us not to worry about the current deficits. They’re happy to lend the federal government money at very low rates. What the bond market is telling us is they’re terrified of deflation and of a weak economy for a very long time.
Now one may ask why after huge stimulus and bailouts the bond market is still scared of deflation, but that answer may preclude another stimulus so leave that aside. Krugman is not the only one making these arguments. They reach very high on up.
Clusterstock notes a backdoor way for the Treasury to drop money from the air that bypasses Congress the whole way! Great work if you can get it, running a country with no accountability. Anyways the nuts and bolts of the idea:
So the only question is: Does the Treasury have some way of spending A LOT of money without Congressional approval? Because if it does, then no Fed mechanism is necessary, and presumably the political gridlock is no longer an issue.Many writers have taken the government at their word that this will not happen. They should know better, and if it comes to pass a simple "I am shocked" will not suffice as a cop out.
And in fact Treasury probably does have a mechanism, via Fannie and Freddie (at least) to take over much more of the housing market, and deliver cash to homeowners. That's what the big rumor was earlier this month in fact, that Obama would find a way to push tons of cash to homeowners via the GSEs. So far the administration is denying this, but if Geithner and Obama want this, they can pull it off, have it financed by the Fed, and no GOP opposition should be an issue.
A Michael Pinto interview on King World (via Zero Hedge) has plenty of heavy duty ranting on some other ways for action to happen. This includes buying even more real estate and more stocks.
Of course the problem with a goosed stock market is most regular folks, and you may be shocked to learn that "regular folks" have very little money in the market, are walking away in droves. What good is S&P 1600 when no one is on board for the wealth effect? Jobs would be better, but what can you do?
Overall I think there is going to be plenty of support for the stock market. We could argue about why that matters if it is built on a charade, but traders don't care, they just operate. With a wink and a trillion or so from the gift givers those bears in the majority (I just don't buy this BTW) may want to have fast paws as overnight headline risk will be high. How about being short big time and waking up to this CNBC headline:
Treasury to buy indices 30% higher, says short term fear should not impact economy
That would suck, yes?
I am over playing this angle but I think you get the point. Beyond all the games that are already in play, some new stupid pet tricks will be put in place. Housing and the stock markets are the major targets, but State bailouts and some others novel giveaways are not far down the line.
What remains to be seen is how well these kinds of things are going to go over with the public. So far reaction has been muted or negative. Worth a shot though!
Have a good night.