Obama's Nightmare Team
Market in Correction
The U.S. markets are in a major correction. If you see any bubblehead portfolio manager on TV telling you this is a great buying opportunity, know that this man/woman is merely a gambler rather than an intelligent speculator. For the foreseeable future, the market is a roulette wheel. Until the dust clears –- that is, until market participants figure out the direction of the economy -- this is a good time to be in cash (and non-cyclicals like biotech).
I note with some small degree of vindication that the S&P 500 finished last week at the same level as it was when I called a market top in October, 2009. Perhaps all I really missed was a needle peak that has now evaporated faster than President Obama’s high public opinion rating.
As for why the market has turned bearish, Obama has certainly been doing his part. This last week he could have truly ushered in some real change on his economic team. Imagine him announcing that he was replacing his easy money, ultra-Keynesian, babes in the woods triad of Summers-Geithner-Bernanke with the Dream Team of John Taylor at the Federal Reserve, Paul Volcker at Treasury, and Martin Feldstein as top White House economic advisor. That would have truly turned this country around in one single day. (Note, by the way, that I didn’t even mention Christina Romer and Jared Bernstein. These two White House accoutrement are truly Lilliputians at a time when we need Big Bold Thinkers.)
That said, the economic headwinds we face transcend anyone at the helm. Yes, we had a big GDP number. But few believe it won’t be revised downward, and even if it is big, it does bring closer the day of reckoning when the Fed must confront its bloated balance sheet and the White House must confront its ballooning deficits.
Sure, the markets could take off again next week despite this gloom. But the bigger point here for traders and investors is that the bullish trend has been broken and the days of making easy money like March 2009 to June 2009 have been replaced by more cautious times. Stay tuned.
Navarro on TheStreet.com
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