I’m writing this about four hours after the Dow Jones closed out the first week of a negative downturn not seen pretty much since the end of March.
It seems like ages ago in these times so compact with history changing moments, but back then I posted a blog entitled “The Audacity of DOW” (25 March 2009). You can read it in the archives.
On that day, the Dow Jones shot up just a smidgen under 500 points based on what I called a presumption that stock speculation could move forward flushed with a big blast of taxpayer money. Secretary of Treasury Geithner had dropped the laxative economic bad pill to induce the purge of his public/private holding tank enema solution to cover between 500 to a trillion dollars of bad assets with government and corporate bank efforts and I was just not prophetically buying it.
Here we are seven weeks and two days later with a banking system still bound up. As the stock market continued to generally rally a lot of happy talking heads on the networks tried to perk up their forecasts like hounded Seattle weather anchors trying to end the climate pain by trying to pull sunny skies out of a place where the sun in Seattle never shines in spring — the sky.
Oooweee! There are these wonderful sounds coming from No-Bias-No-Bull to the Keepin’-Them-Honest crews at CNN about happy days are here again, just around the corner of six months to two years, maybe. And golly! Despite the 500-point climb in the stock market back on 25 March that conjured a pearly white grin on Lou Dobbs’ permanently screwed in dentures, March ended with 640,000 people joining the unemployed. But hey, stocks kept generally seeing light out of the 7,000s into the 8,000-point margin. That’s as good a bit of news as adding only — and I stress, only — another 460,000 people in the unemployment lines in April. Perhaps that includes many of you reading this.
Can you stand this hunkey-dory good news? The banks are happy. Most came through with flying colors after Geithner’s all-too-easy toxic loan stress test and the G-Man will give them more billions. Fiat is going to take up what’s left of Lee Iacocca’s former auto company for Jesus Chrysler’s sake!
Since the stock market began to rally at the end of March only 1,100,000 more Americans have lost their jobs, not the 1,280,000 expected if the trend of losing around 500,000-to-650,000 jobs, month after month since last autumn had continued into May. Moreover, we don’t even yet know what good news is waiting to join the unemployment lines in May. Aren’t you excited?
I can’t tell you how happy it makes me to know that a few hundred thousand less people in April were being financially massacred than in March. I’m happier about it than an Obama kid getting a $5,000 swing set as a political gift to Dad.
I saw this little bubble coming on 25 March. It’s a bear market rally, really. You get them when under the influence of Mad DOW Disease. We will see a lot of these. Perhaps as many as Depression era Americans saw from 1933 until the prosperity came home with manufacturing salvaged by World War Two in the 1940s.
Back on 25 March when the current Obama the Bear Rally began I wrote the following after Geithner gave the bankers some more money with Obama’s sunny-side-up smile egging him on:
“[Under Geithner's new effort to throw a money enema at the investment banking system's toxic debt] the people that gave us this economic crisis, the hedge fund guys, become the middlemen, the special brokers to fix it. Sort of like giving the arsonists a new box of matches. Moreover, the heggies do not have to pay that money back if they lose on these transactions. Heggies do not loose any money in this cash for trash deal if it goes bust. You, the US taxpayer, will feel that pain.
“What I see here are lessons unlearned, a systemic problem, unencountered, and the addicts (both in the private and public sector) who need to clean up are given more funds to snort up their noses like cocaine. The economy might enjoy a false high for a time, but there is always a crash to earth when the drugs wear out.”
This week the DOW came down from the Geithner LSD money tab on the reports of a sagging retail market of a less than Polly Anna approved number. The investment banks are eating our money and still constipated. People aren’t spending money. Many companies are reporting 40 to 50 to even Starbucks Coffee sized 70 percent downturns in sales. President Obama is not meeting the systemic problem.
Here again is what I said back in 25 March when the current market rally that stumbled this week, began:
“The audacity of a new economic bubble is being blown, starting today. Unless some more awareness of the causes of our economic incontinence guides the decisions of Obama, the barons of business and the Wow Jones Industrial then the world is on schedule for an inflationary depression by the end of 2010 the likes of which has not been seen since the days of the German depression after the First World War.”
The new president is still straight on course to his first major crisis of credibility as I predicted in detail in Predictions for 2009.
Many of you who have read the book have written me saying you wish the president would read it. In his defense a lot of his efforts in other dimensions of his job, like foreign policy, have started on the right foot, but the economy is his Achilles’ credibility heel. There’s time to change course if he stops believing in change and becomes the leader of economic change. Right now he’s in a bubble made out of the hot air of economic insiders and the air of innovation is beginning to run out.
Obama? Where’s your blackbury. Normal hard working Americans are calling.
(15 May 2009)