With the Superbowl done, the nation settles in to the depths of Winter. This has been a hard time of year for many reason, not just the sudden end of football. The last few years have been harder to take than what the Panther fans are feeling about now.
This year? It may yet be worse, according to prognosticators. Then again, the worst may be over. Let’s update last year’s big stories to see how this year is coming along to see if there’s reason to hope.
“Never forget that the stock market is just a market for stocks.”
– Herman Miller, an old accountant I knew when I was a kid
The bloodletting on Wall Street may have paused, but no one is taking any chances. We’re not technically in a bear market yet – the S&P500 would have to break its resistance around 1863 before that happens. But the world is braced for it. Morgan Stanley has told its investors to hold on at least into the third quarter – exactly what Barataria said a few weeks ago.
Why all the negative sentiment? After all, China’s loss can only be our gain if you believe what you hear in politics. Then again, investors aren’t that gullible. It’s one big financial world and what goes ‘round comes ‘round. While there are some good reasons to take a six month or so pause, most of the reasons for this downturn are indeed lousy. It’s time to run through, and over, these arguments.
You might be forgiven for thinking the World Economic Forum (WEF) is not something you’d be interested in. After all, the annual event better known as “Davos” for its posh ski resort location is not a gathering you were invited to. It’s strictly for the top economic leaders of the world, aka, “The 0.00001%”.
While it may seem reasonable that this is where the great conspiracies to defraud and enslave the masses are hatched, it isn’t. The agenda and discussion is much more like what you’d hear at a Bernie Sanders rally than you might expect. This year’s topic is “The Fourth Industrial Revolution” and there is far less concern about making it happen than the nasty side effects when it does go down – leaving behind billions of starving people and a ruined planet.
Money is fleeing China. That’s hardly news, since it’s been happening for well over a year now. More accurately, money is now seriously fleeing China – at a rate which shows how little confidence anyone has in the dragon. The mythical creature apparently is made from a wall of paper, but it bleeds like any other economic animal – green, not red.
While the throes of this beast are roiling stock markets all around the world the truth of the matter is that money leaving China has to go somewhere – and “somewhere” is going to be primarily in the US. The situation is much more like Japan circa 1990 than nearly anyone has admitted yet. Where the growing Shia-Sunni war in the Middle East is going to be the policy story of this year, the inflow of Chinese money is already shaping up to be the economic story of 2016.
“This is no time to panic. There’ll be plenty of time to panic later.”
So far this year the S&P500 has lost 100 points (5%). Where did they put them? Isn’t hard to lose something that is pointy? Despite looking under every sofa cushion the search has so far remained pointless.
It may not seem like the time for humor, but the US market reaction to the meltdown in China is purely comical in many ways. It shows how much the market is responding to emotion rather than reality – and the prevailing emotion is fear. Run away!
With 2015 out of the way, it’s time to look forward. But as we’ve shown many times, the best way to draw a line into the future is an extrapolation from the past. Such is the real tradition at New Year’s – looking back and ahead at the same time.
Besides, the stillness of the present time moment is usually more of a hangover.
Is the Federal Reserve nothing but a tool for big banks? According to an op-ed by Sen Bernie Sanders (I-VT), it sure looks that way. The presidential candidate and hero to millions of progressives made the case for an audit, tighter controls, and other measures to rein in the nation’s central banking system.
There are clearly problems with the Fed and it’s very mixed charters to tame inflation, encourage full employment, maintain the value of the US Dollar, and regulate banks. The more presence and power the Fed gains the more this is an important issue. But today’s “progressives” aren’t in a mood for just reform – many are in a mood to “End the Fed!”
While that position is understandable it’s horribly misguided. But it’s a great highlight for the tension inherent in not-that-subtle difference between a “liberal” and a “progressive”. And it’s ultimately a rather irresponsible position that Sanders is taking.