Hillary, Hill biotech inquiries, Congressional and corporate greed combine to thwart budding Wall Street rally as short sellers and HFTs step back up to the bearish plate.
WASHINGTON, Oct. 6, 2015 – Today’s report is going to be more succinct than usual because the news is much simpler than usual. Desperate for scandal-distracting scare headlines, Hillary Clinton recently denounced a greedy price-gouging gambit—since rescinded—by a relatively unknown biotech company. That little game ignited a selling and short-selling firestorm by HFTs and bears in the previously white-hot biotech sector, promptly rippling everywhere across the pond and tanking pretty much every other stock on Wall Street.
This morning, we get a follow-on story in the Wall Street Journal (page A-1), noting that the usual suspects on the Hill are gearing up to attack other random “price-gouging” activities in the pharma sector. Bam! Biotechs and pharma stocks are getting brutally beaten again today. In politics, corporate America is your friend until you can discover fresh headlines and votes by bashing them.
While there is clearly some hanky-panky going on in the drug sector, Obamacare has at least indirectly encouraged it. In its dubious path to passage, this still unpopular legislation passed because it co-opted and coerced the entire biotech and pharma industry to back socialized medicine since the new paradigm would give them monopoly status and pricing power on their drug portfolios as their reward. (That was never reported, of course.)
As distractions go, this biotech distraction is a pretty good one. The average voter hates drug companies almost as much as he hates politicians, used car salesmen and political operatives posing as journalists. But the average voter never understands that most if not all these companies traditionally support Democrats, not Republicans. Nothing to see here, folks, just move along.
But wait! There’s more! In the WSJ this morning, we learn there’s a very real threat that Congress, in its infinite wisdom and its infinite desire for MORE MONEY, is looking to severely trim the interest rate the Federal Reserve pays to major banks for parking their money at the Fed, the nation’s central bank. Why? Well, to pay for all that shovel-ready infrastructure upgrading we thought had already been funded years ago by Obama’s highly-touted (by him) $750 billion “stimulus” that was put into play early in his first term.
That money, as anyone who was paying attention already knows, was put to work funding teachers and teacher unions and other union jobs so that taxpayers in the private sector could get laid off instead. No one knows what happened to all those shovel-ready projects. Deep Throat’s advice to Woodward and Bernstein back in the early 1970s still pertains: Follow the money.
Meanwhile, presumably, those unfunded or underfunded shovels are still ready. In the Senate at least, both parties will happily steal most of that interest money from the major banks to pay for infrastructure project. Indeed, current Senate Majority leader McConnell, aka “Harry Reid Lite,” is leading the charge, and the Dems, who always need more taxpayer money to buy votes, are happily tagging along. Unfortunately, a likelier scenario is the typical one: the money will end up going to supporters of the Democrats (and Republicrat porker McConnell) in time to fund any number of faltering 2016 campaigns. What a farce.
While we have little sympathy for the major banks, whose crooked officers never suffered very much during the height of the Great Recession-after striving mightily to cause it, we’re also aware that banking profitability has been severely hampered by the uselessly draconian effects of the overreaching Dodd-Frank law, which we’ve discussed here before. It’s precisely this kind of hamstringing that’s keeping banks from funding loans for the rest of us; and that is precisely what’s been hampering U.S. economic growth and job creation since Obama first took (and then ignored) the oath of office in 2009.
The result of this latest threat to the financial sector has crumpled most banking and many insurance issues this morning. Taken on top of the ongoing biotech smackdown, we’ve having a mediocre to very down day on Wall Street today. The major companies in the Dow Jones Industrials are very slightly up as of 11:30 a.m. EDT. But the S&P 500 is down ½ of 1 percent and the tech-heavy, biotech-heavy NASDAQ is getting smithereened, trading off over 1 percent and sinking.
We’re seeing once again the way politics, as the game is played in 2015, is systematically destroying the American way of life as politicians base their actions solely on what will play with voters long enough to get themselves re-elected in the next cycle. The long game, however, is for politicians in both parties to secretly support their corporate masters, while “fighting for the taxpayers.” We’re seeing that infuriating dynamic playing out once again on Wall Street today.
Investors are best advised to stand clear for now. As has been the case throughout this rotten year, most investment decisions any of us make in 2015 have have had a way of turning out badly. That’s largely due to political and governmental abuse of the system as it’s aided and abetted by those criminal gangs of video-gamers known as high-frequency traders (HFTs). Around the world, counterparts of this rotten new feudalism are simply making matters worse for themselves and for us. It’s a bad environment and investors are clearly wearying of the whole game.
We’ll sit on the sidelines today, and see what happens tomorrow.Click here for reuse options!
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