Robert Stein 1924-2014

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Thursday, August 04, 2011

Why Wall Street Has the Willies

Decades ago, when I worked for one of America’s richest men, Norton Simon, he told me, “I stay out of the stock market. You could spend every hour trying to figure out what they’re thinking and still be wrong half the time.”

That advice comes to mind as stocks continue to dive in the days after a “conservative victory” in the debt-ceiling fight that should have cheered up markets by avoiding a default, cutting government spending and preserving the heavy hitters’ tax cuts, with more of the same in sight.

The talking heads will have convoluted explanations for crashing stock prices involving double-dip recessions and global fears, but a non-investor with no financial expertise whose interest is anthropological curiosity rather than greed can suggest something simpler.

As much as its denizens rail against regulation and government interference, there is something Wall Street hates and fears even more—-unpredictability—-and Washington’s recent behavior has given them a taste of Tea Party craziness with its Congressional freshman and GOP Presidential candidates saying in effect, “To hell with the economy--we want what we want.”

Nobel Prize economist Paul Krugman says “markets are pricing in terrible economic performance, quite possibly a double dip. And it also says that Washington’s deficit obsession has been utterly, totally wrong-headed.”

A non-Nobel onlooker would only add that markets are also pricing in Congressional crazy, and that’s what may terrify them most of all. Wall Street’s “fear factor” has a life of its own and may be telling us something we really need to know.

Update: "The debate over raising the debt ceiling, which brought the nation to the brink of default, has sent disapproval of Congress to its highest level on record and left most Americans saying that creating jobs should now take priority over cutting spending, according to the latest New York Times/CBS News Poll.

"A record 82 percent of Americans now disapprove of the way Congress is handling its job." The other 18 percent can't all be on Wall Street.

Meanwhile, Republicans have seized on the stock price decline to point out that, in the State of the Union message, the President bragged about the market “roaring back,” and that the last time the stock market declined for nine straight sessions was during Jimmy Carter’s days. No political winners this week.

1 comment:

Mike Elliot said...

Even though I consider your political opinion to be nothing more than the lamentations of another liberal whackadoo, I find the fact that a gentlemen of your obvious age has taken to blogging completely cool!

I look forward to reading more of your observations and opinions.

-Mike Elliot