Recession? What Recession?
I've been hit with several rumors lately that will make excellent future posts, but for now, let's do a little news-crunching.
-- First, the Sentinel had a front-page piece on the fed rate cut in Sunday's newspaper. Written by Harriet Johnson Brackey, it took a pollyanna tone, beginning with the headline: "Federal Reserve's rate cuts good for your wallet— and your mood, too."
Is it, now? This kind of rah-rah coverage of the economy isn't going to help anyone but the thieves at the banks who created the subprime disaster.
I'm not saying a rate cut wasn't in order: a precipitous fall in the market (I won't use the term "crash"), which is what we seemed to be facing early last week, ain't good for anybody. But it should have been 50 basis points instead of 75 (and this week the fed shouldn't cut any more at all after its meeting, though I suspect at least a 25bp cut, if not 50).
My gut tells me that the market should just have to take its medicine and fall to 11,000 (or 10,000 possibly). Because all the cuts in the world are probably only postponing the inevitable plunge in the markets brought on by the housing and credit mess. And the fed is supposed to control inflation -- and the rate-cutting will only exacerbate that.
Have you noticed the prices at Publix lately? Bread that used to go for $1.50 is going for $2 or more. Milk is climbing. The damn rotisserie chickens they sell are now going for more $8 (they used to go for under $6). The fed's hair of the dog might just see those chickens hit the 10-dollar mark.
Why do you think the smart money is running to gold right now?
The economy is in trouble. I don't know if the downturn is going to last another year or another decade, but rate cuts aren't going to make it magically disappear and might make it worse (can you say "stagflation"?). You want to read something about it, read this piece from InvestorsInsight's John Mauldin. Yeah, it's long and it's complicated, unlike the happy Sentinel, but you might actually learn something from it.
-- Speaking of the housing mess, Michael Mayo had an interesting column on the property tax amendment in which he confessed to voting for the property tax amendment. As he writes, Mayo has been criticizing the amendment publicly for a long time, so his vote might come as a surprise. Not to me, though. I'm voting for the thing, too, just because I think portability (unconstitutional though it may be) will give a strong jolt to the market before it gets stricken down by the courts. And I'm just as selfish as the next guy I suppose.
-- Let's see, what else. Oh, might as well post Sentine Editor Earl Maucker's column about newspaper endorsements. It's too broad to be worth reading, though. The really sad part is that he could have addressed his newspaper's endorsement of Hollywood Mayor Mara Giulianti, which has further eroded the thinking man's confidence in the newspaper. Rumors are circulating in Hollywood that Publisher Howard Greenberg embraced Giulianti during her interview with the board, sending a subtle message to his minions. But don't worry, Earl tells us there's nothing to see behind the curtain.