JACKSON HOLE, Wyoming, August 23, 2014 – The Maven didn’t bother to file a report Friday, given that both Fed Chair Janet Yellen and ECB guru Mario Draghi were holding forth at various times during the morning and afternoon, heckled outside their Jackson Hole meeting venue by a few prescient citizens who seem to understand that for middle class Americans, the Great Recession/Great Depression II is still an ongoing reality.
Yellen’s and Draghi’s actually speeches can be effectively be summed up in the title of a beloved tune from the Gershwins’ “Porgy and Bess”: “I got plenty o’ nothin.’”
Back on Wall Street, the day’s already Hamptons-thinned trading action was volatile and unpredictable awaiting fact and rumor that there was no point in making any major trading decisions.
Putin’s latest fun and games in Ukraine didn’t help either—he’s lying again. Defense Secretary Hagel’s rather alarming warning about the U.S. being in danger of an ISIS attack didn’t add any confidence. Nor did that warning persuade the Administration to finally do something about our southern border, where ISIS infiltrators have likely been entering the country unchallenged. Tee-time is more important.
Now that both international monetary mavens have spoken their peace, the real Market Maven can now weigh in. The judgment on their judgment: meh.
More of the same, really. Fed Chair Yellen in her few short months has already developed a style of speech that was long ago perfected by, of all people, Richard “Tricky Dick” Nixon.
If you were the least bit objective, when Nixon landed the Presidency, you would recall that his speaking style, far from charismatic, was remarkably forthright and positive to a point. Or so it seemed. What Nixon actually accomplished in his public pronouncements was something far subtler. As President, his speaking style was actually a brilliant amalgam of form and substance.
Nixon was always in fine patriotic form when called for, and always in a high dudgeon when singling out evildoers. Unless you were a die-hard Nixon hater from birth, it was remarkable how confident and patriotic you could feel after one of his televised national addresses.
But later on, when you thought about what the President actually said, you realized if he had said little if anything at all. On the surface, what he generally said sounded pretty good. But underneath, he often conveyed nothing informational at all. It was mostly smoke and mirrors meant to distract you from the fact that he was continuing to do exactly what he intended to do no matter what he said.
Listening to Janet Yellen opine on the current state of the economy, you get the sense that she’s channeling the spirit of Dick Nixon as well. In her speech yesterday, she was amazingly Nixonian, allowing auditors to pretty much hear whatever they wanted to hear without really coming down hard on the interest rate situation one way or the other.
Rally-obsessed bulls listened to her deliberately opaque comments on interest rates and continued with their assumptions that rates would indeed go up. Some time before the year 2050. At the same time, market correction-obsessed bears heard that interest rates “could” go up soon, like maybe midnight, January 1, 2015.
So Janet Yellen effectively accomplished a Dick Nixon during Friday’s Fed Chair oration, allowing investors to have their cake and eat it, too. But, as we’ve already mentioned, most big time traders were probably catching the non-news from their deck chairs out in the Hamptons.
Or, better yet, not catching the non-news out on Martha’s Vineyard where, like the feckless, politically tone-deaf Barack Obama, they were out on the links tightening up their golf scores and paying as little attention to business as they possibly could. That, after all, is for the little people.
The little people, of course, have no skin in this game at all. Whatever “skin” they might have had was stolen by the 1% during our still ongoing Great Recession. Some random protesters showed up at Jackson Hole this week to point out that fact, as in our header photo above and our adjacent photo here. Indeed, Yellen seems sensitive to this. But so far, what’s left of the middle class continues to sink into static wage hell, assuming, of course, that any of them have been lucky to hold onto a wage at all.
Next up to the plate was Mario Draghi who crowed about how effective his minimal actions back in June have been in stimulating the European economy.
Since then, of course, a major Portuguese bank has gone into rigor mortis, the economy of his native Italy has sunk back into recession, the mighty German economy has grown stagnant, and the Rushkies, as they have over the centuries, are once again on the prowl for territory due to the “aggression” of the West, this time, allegedly, by the U.S. and their NATO puppets.
Ah, but no worry. Mighty Mario is taking credit for the weakening Euro. That summer weakness is a fact, of course. The Euro has indeed dropped by 3-4 cents against the wobbly dollar over the last couple of months, which in currency terms is a pretty impressive drop. But he’ll need to do a lot better than that to kick start at least a modicum of stimulative inflation in the Eurozone both to get business juiced again and also, like the U.S., to try to inflate itself out of debt levels it can’t otherwise hope to whittle down meaningfully.
That’s what bond-funded socialism will do for you. It’s a shame our current Administration in Washington didn’t learn that lesson without deciding to replicate it here. But there’s no hugging, no learning with these people. America has indeed been “fundamentally changed,” and flattened into a European style slug-ocracy where “the people,” entirely dependent on the dole, continue to vote, time after time, for the same people who keep them there.
Ultimately, what we’ll see is the U.S. raising rates too soon—given that the middle-class has seen zero benefits thus far in the current low rate environment; and the Eurozone dithering on cutting rates and adding stimulus until not just Italy but everyone in the zone is deep into recession and deflation.
One thing we know in this country for sure: five years of money printing hasn’t put much spendable cash at all in the hands of the average consumer. We know this from the “velocity of money” charts put out by the Federal Reserve Bank of St. Louis. To oversimplify, this measure illustrates how quickly dollars are moving around in the economy. The faster they move, the more transactions we have, the more money changes hands, the more businesses and payrolls grow.
But take a look at the velocity of money M-1 chart dating from around the commencement of the ongoing Great Recession.
Dismal, eh? Where’s yours? Truth is, the middle class isn’t getting any. Neither is small business. Only the stock market is, all the better for the 1%. Otherwise, money hasn’t really been “moving” in a productive way since the initial 2008 crash. Hence, the looming stagflation we face one the Fed’s QE stock market prop is entirely removed. Scary.
There are no real heroes any more in politics. The West has grown tired, flabby, uneducated, over-propagandized, and ripe to get flattened by the Putins and Islamofascists of the world. Some real leadership and truth telling are sorely needed, and soon. But long suffering electorates throughout the West remain either too stupid or too depressed to clean political house and bring in new people and new ideas while banishing the faux-socialist oligarchies that have failed.
Those who pondered these unpleasant thoughts upon the conclusion of Yellen’s and Draghi’s speeches nicked the markets for roughly three dozen Dow points Friday. It’s summer, folks are tired of the same-old, same-old. Monday could be another drag as traders try to decide if the current rally is worthy of continuing or not.
We’ll see you back here some time on Monday when the results start tumbling in.