The jobs numbers were 171,000 and 7.9%. Let there be an election. Let the people decide if this is right! So our socioeconomic election coverage comes to an end with the markets making a bounce attempt and President Obama recovering some lost ground. This race has become too close to call, and amid the chaos of the storm I wouldn’t be the least bit surprised to see a repeat of the 2000 election where we don’t get a winner for days or weeks.
Thankfully, this is an era that has come to an end. The worst part of this fiasco is a Congress that totally obstructed a president’s agenda and a president who put his own legacy before the will of the American people. Barack Obama created the Tea Party, and it was the Tea Party that created the debt ceiling debacle that was so ruinous to the country.
By his own admission, the President stated that he didn’t care if he became a one-term President if it meant getting Obamacare passed into law. He pursued the health care issue even as his staunchest and most senior advisors told him to forget it.
Never in my life have I seen such opposition to such an important piece of legislation that was not passed with the vast majority of the American people. This is the legacy of the last 2 years. 2012 was a total waste of time while millions of people struggle along to put their lives back together in the wake of the greatest run of greed in the history of the world. That’s what the financial crisis was. I’m not going to get started on this tangent but the years 2002-07 should be remembered as a time of going for the short cut, doing things the easy way to creep out of a recession and instead things got out of hand when people, institutions and regulators lost of all sense of reality. Had we attempted to rebuild the infrastructure of our cities, especially in the Northeast when we had the money we certainly would not be dealing with a massive debt load. Our cities in the Northeast are so old and need of repair. We missed a golden opportunity to take care of it after the Internet bubble bear ended.
Unfortunately, New York is now not only forced to rebuild, they must think way out of the box to consider building sea walls to protect lower Manhattan and Brooklyn. How much is that going to cost? Supposedly this was the 100 or even 1000 year storm. But who can guarantee it won’t happen again next year?
They don’t have the money. I read in yesterday’s paper the original plans by Army Corp of Engineers for a safeguard project for the low lying areas of Staten Island were developed in 1965! Due to complacency and more urgent needs NYC never followed up on those plans.
When I was there last year for the aborted hurricane, the big story was the increase in tolls over the next few years to cross the bridges and tunnels to get into New York City every day. The good folks of New Jersey would pay roughly $12 per day (approximately) to either use a tunnel or cross a bridge to work in the city. These tolls are systematically increasing to 15-17 over the next several years to pay for all the infrastructure work needed to keep the bridges and tunnels from falling apart. This was before any thought of a storm. Now the estimates to put the NY metro region back together again is $50 billion and Wall Street people think it will be double that. Where are they going to get the money to do it? Are they going to raise taxes? They can’t do that because New York is already the highest taxed place in the country. Are they going to increase the tolls? They’ve already stretched people to the limit of what they can pay. I want to say that New York is going to come back from all of this and they will but there will likely be another exodus of people out who just can’t afford to live there. New York will make it collectively, but individually that is not likely to be the case.
The Federal government will come in with FEMA money to put people back on their feet and help them rebuild their homes. But what about the businesses who were lost in this disaster? I’m thinking of the sandwich shop down the street from the NYSE who has been there for 20 years but the water destroyed the entire inventory. What will these people do? They don’t have insurance for that. It’s been speculated there are hundreds if not thousands of these small mom and pop type businesses who may shutter forever as a result of this storm.
So we have an election and a disaster. Markets took somewhat of a beating on Friday that leaves them near the lows achieved last week at this time. It ought to give Romney one final boost heading into the big day. But at the end of the day, the stock market correction of October 2011 wiped away the incumbent’s lead. I just hope that no matter who wins, Washington gets to the serious business of leadership in the next session of Congress because we need it and both parties are equally to blame. Congress and the President needed to find it within themselves to do things for the good of the country as opposed to personal political gain.
I have to continue on the story of the week and probably the story of the year. If there was one thing that could put the most important election in our lifetime off the headline, this was it. From a social mood perspective I think there is a link between the greed over the years on Wall Street and concept they could still have a marathon this weekend. The idea they could stage an event like that while people are suffering the way they are is reprehensible. They came to their senses proving old ways die hard. The Sunday papers reported that badly needed generators from the event were still sitting idly by while thousands of people remained without power. We all realize the economic impact of the NYC Marathon to the community but the minute that storm was over and they realized what happened every possible generator should have been put in a position to help people. Real leadership gets in front of problem, not lag behind. The Mayor has been mostly good to this point over his tenure but this was a bad miss.
OK, for now this storm hits GDP for up to half a percent which is something this economy cannot afford. Better hope that Christmas season which is just about upon is very merry this year.
Next page: Considering the Vix
What I can’t understand is how the VIX dropped down this week. It’s beyond my comprehension. Traders have to be shell shocked into denial to allow any complacency into their thinking. But that’s what happened. I originally told clients Tuesday night I thought we’d get a retest of the low even as Europe looked higher and the Greenback got slammed. I said this even as they came back on Wednesday and took the market up. Thursday was wonderful, as they say but the VIX was way too low to sustain. I’m not a fundamentals guy and I’m gauging the low based on the idea that you can’t have a good bottom based on the earnings reports from 2 stocks (AMZN and AAPL) without the requisite fear levels. This storm came so hard and fast it didn’t even allow the media to whip up the fear that we could have a decent retest of the low and bottom it out on storm fears. So now if you look at it from the fundamental view (which I rarely do), nobody saw THIS coming and so it was not baked into the cake. We needed a retest of last week’s low. Now we have it. Fear levels are still not high enough to give us a good trading bottom. But we are going to move on from this as next week the headlines will be the election. What does the market do?
I am not in the camp that it likes Romney and not Obama as I’ve heard other forecasters suggest. Right now we are in a confirmed downtrend. That’s the most important thing you take from this election. Whether the election results give us a double bottom or a better bottom is entirely possible as we are within the time window of the NASDAQ turn on October 31, 2007. The market rallied most of the time Obama was in office so to think it can’t rally if he wins is hogwash. From what I’ve seen, I don’t think the market cares too much for Obamacare but if O does win and the market has a wipeout on real fear the headlines might blame it on health care issues but then life will go on. At some point the market is going to like the recovery from this storm to realize that down the road stocks that have anything to do with rebuilding are going to do well and ultimately it will be a job creator. But that will take some time and perhaps not really kick in until the first quarter of next year. Since it is November we have to think in terms of the Santa Claus rally and that could be a major theme.
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