King Henry goes ape ...
The cultural ideas and norms of recent times — ideas and norms invented and perpetuated by the capitalist system, the billionaires that it serves, their media, their schools, their hierarchy where most of us work and their political system — have not prepared us to act in our own interests in concert with others.
Workers World | What will YOU do about the worst capitalist crisis since the 1930s?
OK, so King Henry's October Surprise, favoring McCain and — supposedly, the global economy, destroyed whatever faith I had in market economies as impartial geo-political checks or balances on unfettered power. Yesterday's late 890-point surge in New York, coming in the face of bottom-of-the-barrel housing prices and near-suicidal consumers, showed them to be little more than passive instruments in the hands of an increasingly brazen totalitarian elite.
A result of recent and ongoing meetings between central bankers and their political masters worldwide, yesterday's onslaught ran contrary to every sense of reason and unreason. It was a calculated, computerized run, targeting 9,000 on the Dow at the close.
It's simple enough to do but, beyond laying the ground for today's planned rate cut, why do it? Because, in terms of policy and legislation (Emergency Economic Stabilization Act) rammed through the farcical system pretending U.S. democracy, they can.
Thousands have spent significant portions of their lives serving jail terms for offences amounting to small-fry insider trading. Now, rather than 'saving' or 'rescuing' the global economy, King Hank — ensconced in the financial capital of the world, Washington D.C., has decided it needs 'fixing'. Will he, the ever-retiring Helicopter Ben, and the rest of the President's Working Group on Financial Markets — read 'The Goldman Sachs' Old Boys Club' or 'Plunge Protection Team', be hauled before the beak?
Hell no. Like Brownie, they'll be praised for a job well done.
Hey, I'm a disinterested observer. I've nothing to gain and nothing to lose on the markets. It's just that rigging rather than influencing them runs contrary to the principles supposedly governing them. In short, it makes a mockery of any notion that Western markets are any freer than those of China or the former Soviet Union.
These guys are not, in the long run, going to resurrect the corpse. Fostering an increasing disconnect between the 'financial' and 'real' economies, they're shilling false hope, prolonging the pain, and denying the grieving process. And they're doing so in collusion and with the blessing of the G20.
More, they boast about it.
Before mounting yesterday's onslaught, the Plunge Protection Team (from which we hear too little) put out a press release.
"Our primary focus at Treasury is to strengthen U.S. financial institutions and restore the flow of financing that is necessary to support and build our economy." ... "Since March, the PWG has worked to ensure implementation of its recommendations, and issued an update just over two weeks ago on progress to date. We noted that, while no single measure can be expected to place financial markets on a sound footing, implementation of the recommendations is an important step in addressing weaknesses. Substantial progress has occurred, and more progress has been made in some areas than in others as efforts have been prioritized to address the most immediate problems. The pace of implementation must be balanced with a need to avoid exacerbating strains on markets and institutions. Still, further effort is warranted, and the PWG is continuing to carefully monitor markets and implementation and will not hesitate to make recommendations if necessary."U.S. Treasury 28 October 2008
Trust them. They will do whatever it takes. Unfortunately, in so doing, they will take with them a fundamental freedom, i.e. a somewhat-free market. As consumers heading towards a real-economy credit crunch, we'd be better off considering practical solutions to what is now an unfolding train smash.
As for yesterday's rally, please don't tell me — given record housing and confidence lows, every trader working the U.S. markets decided that 2 p.m. ET was just the time to buy.
Russian Prime Minister Vladimir Putin proposed on Tuesday that Russia and China gradually switch over to national currency payments in bilateral trade, expected to total $50 billion in 2008. "We should consider improving the payment system for bilateral trade, including by gradually adopting a broader use of national currencies," Putin told a bilateral economic forum.
RIA Novosti | PM Putin suggests Russia, China ditch dollar in trade deals
220 points in five minutes, an hour after the rate cut. Weird?
I must say it's pleasing to see that even the mainstream and network media — using their ever-neutral, color-coded language, find the Dow's upward lurches a trifle dodge — today it preceded a toxic hedge-fund offload, cushioning its effect to break even at the close (8,990.96).
And I far prefer my "Indian moon shots" to ABC's "NASA rocket" (see post below). When will these people ever get round to calling a spade a spade?
Despite a continuing spate of negative economic news, stocks soared yesterday, with nearly 11% increases in the Dow Jones Industrials and S&P 500. The AP reports Wall Street "had another astounding advance Tuesday, with the Dow Jones industrials soaring nearly 900 points in their second-largest point gain ever as late-day bargain hunters stormed into the market." The DJIA "rose 889.35, or 10.88 percent, to 9,065.12." Broader stock indicators "also surged Tuesday. The Standard & Poor's 500 index rose 91.59, or 10.79 percent, to 940.51, and the Nasdaq composite index rose 143.57, or 9.53 percent, to 1,649.47."
While some reports highlighted the economy' continuing downside negative consumer confidence and continued volatility other media sources portrayed the surge as an indication that the credit markets are unfreezing or that equities have finally established a new floor. ABC World News reported, "Despite a flurry of bad economic news today, lower home prices, consumer confidence at an historic low, the market took off like a NASA rocket. ... Some traders explained today's monster move by pointing out the good news, including strong markets overseas and an anticipated cut in interest rates tomorrow by the Federal Reserve," but the "irony was there was just as much bad news today." The CBS Evening News noted that "since the collapse of Lehman Brothers six weeks ago, we've seen the biggest point gain and the biggest point loss ever and 29 sessions when the Dow was up or down in triple digits." NBC Nightly News also noted that "consumer confidence has plunged to its lowest level in 41 years in all of the years that it's been measured."
The New York Times reports the story under the headline, "Even As Dow Soars 11%, Skeptics Lurk." The Times says that after "four mostly miserable weeks, a powerful afternoon rally left traders wondering if it was time to buy again. ... Many other investors, however, remained unpersuaded." USA Today reports the gains "restored $1 trillion in stock value, taking some of the sting out of the $6.6 trillion that's been erased from stock portfolios this year, according to the DJ Wilshire 5000." But analysts "cautioned that this could turn out to be the sixth in a string of failed one-day rallies in less than a month that lured buyers in only to shred more wealth."
USNews | Dow's Dramatic Surge Met With Wariness
Needless to say, the unquestioning business media are flailing around in the dark. The closest they get are "program trading" and King Henry's "'new normal'".
Even the featured panelists at the media event, who are among the brightest in the investment business, are uncertain. "Talk to 10 people, and you’ll get 10 different answers," says indexing guru Gus Sauter of Vanguard Group. "Maybe 11," chimed in Lee Kranefuss, global chief executive officer of iShares, Barclays Global Investors.
One theory for the late-day swings is that mutual funds and hedge funds are selling (or, like today, buying) stocks later in the trading session to cover expected redemptions, or inflows. Another theory is that active managers and hedge funds are meeting margin calls. Maybe it is a result of program trading.
I’m surprised no one has a concrete answer. What is your take on the late-day swings? Why is this happening now? Will it ever end, or is this part of the "new normal"?
BusinessWeek | Explaining the Late-Day Market Trading Surges (and Declines)
