What has Ben Bernanke wrought? Since the FED CHAIRMAN uttered that Phrase ”FISCAL CLIFF” at the now infamous April 25 press conference, the S&P has dropped more than 6% (take out month-end window dressing). Investors were unnerved by the Bernanke acknowledgement of a huge drop in GDP if the Washington politicos did not start to deal with the problem of fiscal retrenchment that awaits. It has been estimated that the hit from spending cuts and tax increases will result in at least a 3.5% hit to U.S. growth. It was Bernanke that lit the fuse and today the CBO weighed in with its great concern over the “fiscal cliff.”
Posts Tagged ‘dollars’
The “MARKET” will resolve to test the GRIT of traders and investors as the mysteries of politics and economics collide to make the daily lives of traders difficult, to say the least. In 2011, the markets left traders and various investors sleeping like babies as we were relegated to getting up every hour to cry. We must remember that the market’s “JOB” is to cause as much heartache and pain to as many people as possible as money seeks to attain a positive return Last year the market was in its full glory as it caused some of the world’s foremost global macro investors to be humbled in a capacity not seen since the credit market debacle of 1994-95. This year seems to be of a similar ilk as the travails of the EUROPEAN UNION will continue to weigh upon the flows of global capital.
As the sellers of snake oil and the creators of the corporate cult of personality take their “bows” for breaking the story about the European bailout that roiled the global equity markets, I had to step back and realize that the European Polity is not the U.S. While Geithner and others are held captive to the vagaries of the DOW JONES and S&P, it seems that the Europeans, and, especially the Germans, are not enthralled by markets going up and how many days of a winning streak exist. There are actually decision makers who are not captured by the price of Deutsche Bank or Siemens. In the U.S. it is only the stock market reactions that seem to dictate the decisions made in Washington. Some in Europe seem to want to effect policy for the longer term regardless the cost to certain financial entities. If forcing the issue on how large a hit private bondholders are to take means that markets dive … so be it.
The seriousness of the U.S. DEBT CIRCUS cannot be overstated but evidently not from a market perspective. U.S. Treasuries have continued to be well bid as many investors still run to the TREASURY market in times of uncertainty. Besides the “rush” to safety in the BONDS, the FED has so badly perverted the market’s pricing mechanism that it is very difficult to determine the genuine impact of the Washington default countdown. European sovereign debt has been trashed during the last 20 months as there was no real central bank support to the market as the EFSF was a late comer to the scene and was provided with meager provisions.