Remember me
“Buy me a drink, sing me a song; take me as I come 'cause I can't stay long!” --Tom PettyBig Ben chimed on the economy last week; he spoke a lot but said little we didn’t already know.He pledged that the Fed stood ready "to provide more accommodation if needed" but professed "central bankers alone cannot solve economic problems."He admitted the economic recovery "remains far from complete," “growth has been less vigorous than expected," and labor markets are waffling through a "painfully slow recovery."He shared that households are “more cautious about the outlook than he expected” in a nod to the shifting social mood and abating risk appetites we’ve monitored the last few years.These aren’t new issues; they’re the result of cumulative imbalances that have been steadily building under a seemingly calm surface. Minyanville highlighted many of these dynamics long before they were considered news. In fact, most of them seemed far-fetched when we first posited the premises.We noted the distinction between medicine that cures the disease (debt destruction) and drugs that mask the symptoms (stimuli) when the semantics seemed inconsequential. Morgan Stanley (MS) echoed that angst last week when they opined that government defaults are all but inevitable. (See: The Eye of the Storm)We flagged Fannie Mae and Freddie Mac as toxic enablers as far back as 2003 when their stocks were trading around $70 each. Today, their combined price levels are a shade below 70 cents. (See: The Sad Conclusion)We foresaw a “prolonged period of socioeconomic malaise entirely more depressing than a recession” in 2006 and suggested financial institutions were technically insolvent in 2007 as the Dow Jones Industrial Average (DJIA) and bank stocks (BKX) were at all-time highs. Tthat didn’t win us many friends on Wall Street. (See: The Upside of Anger)There are more examples but I’ll stop here. My intention isn’t to garner a pat on the back or a victory lap, it’s to demonstrate the forward-looking lens with which we operate. As we’re apt to say, Minyanville offers the financial news you need to know before you know you need it.Captain ObviousI’ve taken this walk down memory lane for a reason: over the last few weeks, an interesting evolution has unfolded as it pertains to the psychology surrounding the marketplace and the point of recognition regarding our economic condition.CNBC aired “DEPRESSION” segments, telling the world just how bad it is -- and how dire it will become. The New York Times ran front-page stories about wary investors fleeing the stock market, the end of the homeowner nest egg and the baffling stock swings that remain ominously unexplained. (See: What Does the Sudden Shift in Headline Risk Tell US?)Savvy seers, including one of the all-time greats in Stan Druckenmiller, have “gone dark,” due in equal parts to frustration with the markets and a desire to focus on self-fulfilling, philanthropic endeavors. (See: Seeking Solutions in an Uncertain World)Is it the end of the world as we know it?Will this generational funk be passed to our children?Is it time to buy guns and butter and man a post on the perimeter?I would argue this financial funk has been fermenting since the turn of the century, masked by the lower dollar and skewed by the spending habits of a slimming margin of society. While the upper crust and former middle class went about their business, a chasm of discord steadily wedged between what is now commonly referred to as the “have’s” and “have not’s.”What about the eye-popping rally last year? Great question. While the rising tide lifted any boat with an equity sail, those who benefited most were tied to the liquidity of the capital markets -- the same entities that dominate the media and indices. For the rest of us, including small business owners, it was a thin coat of veneer layered atop the aging financial health of Main Street America.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2010 Minyanville Media, Inc. All Rights Reserved.
Most Read
Emailed
Latest
Read Full Article »