Beware The Ides of September

By MICHAEL GRAY

I believe we will look back at this current period as the latest bubble, which pulled us out – temporarily — from the housing bubble. The housing bubble pulled us out of the tech bubble. The tech bubble pulled us out of the housing bubble. The housing bubble pulled us out of the S&L bubble. I’m starting to see a pattern.

This period from March to the end of August will be called the Trading Bubble. It allowed the “saved banks” to fatten up on insider trading – using tools granted by the government – to heal battered balance sheets in preparation for the next leg down.

Allowing the chosen banks to sniff the trading activity before it was posted on the exchanges as well as letting their block boxes, which are located next to the exchange’s servers, make 1,000s of different trades hourly on this information has led to record quarterly profits for the insider firms.

Well the saved banks are certainly going to need these “earnings” for the net leg down. September/October will be a hellish time for the US economy. Dollar weakness combined with further credit tightening and additional defaults will be a huge challenge for a Fed, which faces its own Armageddon over lack of support for its debt auctions because of the cratering greenback.

When Congress reconvenes let us HOPE ObamaCare and carbon taxes fall off the agenda. My hunch is that Treasury’s Tim Geithner and the Fed’s Ben Bernanke will push those issues off the docket, with their pleas for additional money to bail out the banks again in middle to late October.

I’d rather be wrong on this point, but I don’t think that is the case. Time will tell.

Numbers Game

Friday’s employment number surprised many on the Street with its 247,000 losses and the U2 unemployment rate lowering one tick  to 9.4 percent. Stocks soared and yields climbed on the news, which President Obama tipped the markets on Thursday afternoon at a press conference that the number would be better than expected.

Now here’s where it gets dicey. If Obama is using this Government Number to ballyhoo the beginning of a recovery I am worried.

This number has more fingerprints on it than possibly any other Government Number. There is birth/death model adjustments, there are seasonal adjustments and a host of other tweaks the Bureau of Labor Statistics has up its sleeves including accounting for all staffing changes occurring within the auto industry.

So with all the alterations this Government Number can be subject to, to have a President point to this number as an indication that his policies are beginning to work, well that has me leery.

For more on Wall and Washington and the economy see: https://mgray12.wordpress.com

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