It Tolls For Thee, Warren
Well, perhaps yesterday’s stock market rally wasn’t all about the race for the Senate after all – today, with the Republican having still won the seat in Massachusetts, stocks began the day on the skids. The proximate cause this time reportedly were the moves to tighten monetary policy in China, but it wasn’t exactly a surprise as the regime has been signaling it for several days at least. (And anyway, if you’re investing on the basis of what you’re hearing from China – and I include their official statistics in that – then God bless you and good luck. I would prefer to throw dice in a casino myself. Blindfolded. The odds that I’ll get a fair report of the outcome is better, and anyway at least I can be pretty sure the game itself is fair.)
There is, though, something odd going on. I am not sure what it is, but look at the following 5-day intraday chart of the S&P 500 index (Source: Bloomberg):
Notice anything odd? The pattern looks closer to an EKG output than a random walk. A sharp rally, slowing down (but still strong) on the 13th and 14th; a sharp open lower on the 15th and a slide to the lows; a bounce, followed slightly more than 2 hours later with a second slide; and a steady recovery.
It’s usually foolhardy to try and read anything into stock market wiggles, but this is a little creepy. It makes me wonder whether there is some systematic portfolio liquidation going on at the higher levels. Since most market liquidity is found early and late in the day, rather than in the middle, it is a more compelling picture than if the sharp downtrade was happening around lunchtime every day.
But enough of that. It’s time to turn to the defense of freedom.
Funny story in the news today: Warren Buffett complained about the new bank levy being proposed by the Obama Administration on banks (here is the story on Bloomberg), which the Administration says is necessary to make sure that “every dime” of the TARP money is repaid (and those who have already paid theirs back…should keep paying!). Why is that funny? Well, when the talk went around, about a year ago, about having a pay czar who would be in charge of limiting Wall Street bonuses, the silence from the “buy side” (institutional investors like Buffett, Bill Gross at PIMCO, etc) was positively deafening. At that point, the opinion of the well-respected Oracle of Omaha would have been helpful, and it made sense: Gross and Buffett need Wall Street, and they need it to thrive. Mr. Buffett is fond of pointing out that an investor should always ask himself whether he would be comfortable with the stocks he owns if the stock market shut down for a year – but I suspect he doesn’t really want to try that experiment. That goes double-ditto for Gross, who doesn’t even pretend to be buy-and-hold.
And now, Warren, you’re asking for whom the bell tolls? It tolls for thee, Warren…it tolls for thee!
Honestly, anyone who is surprised that the notion of limiting banker pay by fiat somehow morphed into a tax on bonuses and into other ways of taxing the bejeezus out of healthier firms to support the weaker ones just hasn’t been paying attention. The latter was eminently foreseeable given the attempt at the former, because they are part of the same philosophy: the wealthy should give money to the poor (and if they don’t, we’ll help them do the right thing). Here’s another quote for you, Warren: “All that is necessary for the triumph of evil is that good men do nothing.” You did nothing last March, when you were needed. On behalf of all Americans who might some day need a sound, liquid and efficient banking system: thanks.
Of course, the punishments for the banks don’t stop there. Obama tomorrow is going to propose new rules on proprietary (“prop”) trading, limiting their size and complexity, according to Bloomberg. The delicious quote in the story:
“We’ve got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behavior of financial players all around the world,” Obama said in an interview with ABC News broadcast tonight.
Therefore, the clever reasoning goes, rather than improve the financial regulatory system so as to be able to evaluate and control the “excessive” risks, we must stop all of those who are trying to make money in “complex” ways. (Note to the Bloomberg reporters: checkers qualifies as complex to a banking regulator.) And the trees are all kept equal. By hatchet, axe, and saw.