Friday, February 21, 2014

Ignorance Is Bliss For U.S. Stock Market

     In the capital city of Kiev in the Ukraine, the violence continues to escalate. In Syria, 130,000 Syrians have been killed by their own government and only 3% of Saddam's chemical and biological weapons have been eradicated under the recent Russian deal. Iran, also under the protection of Russia, is moving ever more closer to becoming nuclear-tipped, to the chagrin of both their Jewish and Arab neighbors. The International Monetary Fund has said that the crisis in emerging markets is getting worse. Domestically, job creation, such as it was, has come to a virtual standstill. U.S. companies have reported less than stellar earnings, with warnings of even worse results for the current quarter. Retail sales in both brick and mortar and online stores have plummeted, and manufacturing and home building have decreased more than they have at any time in the last 3-5 years. The U.S. stock market has decided to ignore all these facts and create its own world where it continues to plod ahead towards recent record highs.
     The Federal Reserve's nurse-maiding of the markets has turned the once great arbiter of the financial health of U.S. business into an empty haul of economic analysis. Where the market was once a leading indicator of either a bad or a good economy, it has become to the Fed like teenagers waiting at the stage door for their favorite pop idols to emerge with their latest pap on vinyl. Good news is now bad news, and bad news is good. All because a failing economy makes it more likely that the Federal Reserve will employ the teat of free money for those in the market to suckle.
     The market, helped in their delusion of a growing economy by the Federal Reserve, is like a run away train that has broken free of the tracks of sanity, common sense, and hard data. And like a run away train, the market is eventually going to come to rest, not so gently I might add, into a mountain of economic realities. The more honest economic analysts have made the bold diagnosis that we are heading back into recession. This is considered heresy by the Obama administration and their lapdog media. A case in point is the way in which they have attacked Doug Elmendorf, head of the non-partisan Congressional Budget Office. Mr. Elmendorf and his organization have had the audacity to point out the millions of jobs that will be lost in the ensuing years because of ObamaCare, and the economic certainty of job loss that raising the minimum wage will cause. 
     The fragility of the markets delusion is constructed of the very thin veil of monetary policy implemented by dilettantes who know little about the economy of which they have taken the reins, never having actually worked in that economy. The devolution of the free market by the nine hundred pound gorilla of the federal government has skewed common sense in the markets, at least for the short term. But eventually, reality will come rushing back in like it always does to claim its rightful place at the head of the economic table. Causing great consternation among those who have been lulled into a false sense of security by the slippery tongues of politicians and the free money that is not so free coming from an economically feckless Federal Reserve. 

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