Market Operations/Observations
The market spiked up right at the open, but not as hard as I would have thought. Then there was a huge insta-reversal and everything was lower. Puzzling action. The numbers for the ISM were pretty bad which is another data point saying things are slowing down. More debt drama during the day and it was messy all around. No positions right now and chasing this market all over the place does not interest me. I have complained before about how slow things happen in finance and now is a good example; lets have a flush out and move on or leave the 200 moving day hugging and move higher and move on.
I will probably look at a bunch of screens tonight and will update if I see something. Would have to be a very appealing idea for me to want to get active in this tape.
Going Too Far?
The debt ceiling deal has passed tonight so the end of the world has been circumvented once again. Rejoice and all that.
With that mess hopefully in the rear view, I did want to say a few things about what I think about all this. But first, I have to set it up.
When you have a teenage kid you do your best to give them room and let them operate on their own. Within the boundaries set up, hopefully the kid plays by the rules and everyone is happy. This does not mean the kid is not out smoking stuff, drinking, and getting naked with others, it just means they are not throwing it the parents face who can then pretend it's not happening. Everyone is happy.
What happens when you have a kid that is sleeping in and missing school because they are drunk? What about the newly formed stoner who cannot act normal and will not stop eating all the chips? What happens when the police drop off the kid because they were caught "parking" in a state forest? I think you know, the clamps come down. Rules are increased and behavior more closely monitored. Maybe the parent will stop taking the kid's word anymore. It happens.
Is there a point? The kid here is the United States.
The US has the world's reserve currency. This rocks because we get to do all kinds of stuff no other place can. Kid Dynamite mused the other night:
It is this very reserve status that enables us to get “away” with some “imbalances” (I almost used the word “shenanigans”) that other countries might not be able to get away with, and if we lose that privilege it will accelerate our fiscal demise.Exactly.
The whole debt debate was never a real issue. What is troubling is how quick and loose the US is using the reserve status to do whatever we want. Consider:
-TARP
-Unlimited swap lines with foreign banks
-QE1
-QE2
-QE light
-QE3 by September (my guess)
-Deficits accelerating
-Forcing interest rates down for years
-Massive asset bubbles
-A financial bust that almost ended the world (so they tell me)
-Lack of political will to change anything
That is quite a list.
Now don't panic. No one is in any position to do anything about this. If the US wanted to print up 20 trillion next month to make every voter a millionaire, it would be tough crap for the world. Inflation expectations may actually go up so don't put this past someone like The Krugmonster. Still, the kabuki theater vote today and how poorly managed the whole thing was has got to start the wheels turning for the world at large. Being the world's reserve currency has special obligations and responsibilities. The US is a teenager drinking a 40 of St. Ides while driving dad's Porsche and texting all the way down the highway at 120mph. At some point you have to take the keys away.
Have a good night.
