WASHINGTON, September 6, 2017 – No surprise. After a negative, volatile, post-Labor Day trade on Tuesday, Wednesday morning’s market opened nicely up. It remains up as of approximately 2:15 today and seems to be gaining speed on the upside as we write this, with all three major averages up between 0.35 and 0.4 percent. The widely watched but somewhat non-representative Dow Jones Industrial average is currently hovering in a narrow range between +80 to +85 points.
Of course, totally objective CNBC quickly hoisted their customary pro-Democrat flag this morning at the opening bell, crediting the morning market rebound to that great pair of Congressional Democrat patriots, Senate Minority Leader Chuck Schumer (Socialist-NY) and House Minority Leader Nancy Pelosi (Socialist-CA) while pumping these nominal Democrats with the following headline:
Dow rises 68 points after Pelosi and Schumer agree to debt limit increase
The article breathlessly regurgitated Democrat talking points all the way:
“U.S. stocks rose on Wednesday after a statement from two top Congressional leaders said they are prepared to vote in favor of a three-month debt limit increase….”
In a joint statement, Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi, both Democrats, said:
“‘Democrats are prepared to offer our votes for the Harvey aid package, and a short term debt limit increase of three months. Given Republican difficulty in finding the votes for their plan, we believe this proposal offers a bipartisan path forward to ensure prompt delivery of Harvey aid as well as avoiding a default, while both sides work together to address government funding, DREAMers, and health care….’
“‘This statement gives some investors hope that a shutdown could be avoided.'”
Interestingly, the (mostly) financial news network failed to report the most interesting part of the story, revising the whole angle in a related story an hour or two later under a fairly surprising headline:
Trump splits with GOP to support Democrats’ plan to package Harvey aid, debt ceiling, spending
This story came in, of course, not long after top Republican leaders Mitch McConnell in the Senate and Paul Ryan in the House declared the Schumer-Pelosi plot Dead on Arrival. So much for the Republican “leadership,” which has managed, aside from the Supreme Court and a few Obama “rule” cancellations has failed to do anything of note since regaining total control of Washington’s political levers on January 2, 2017.
The real story is that Trump is prepared to stick it to this pair of arch-RINOs for their astonishing lack of support since his inauguration. Trump has threatened to “work with Democrats” for months, and perhaps now he appears to be delivering the goods. He certainly owes the Republican establishment nothing at all.
Further, Trump owes even less to the so-called Republican “conservatives” who’ve further gummed up the works by denouncing nearly every legislative compromise in sight. That’s a shame, too, as he’s pushed rules and legislation that is much further to the right than any Tea Party survivor could ever have wished.
We won’t even bother to discuss clowns like flakey #NeverTrumper Jeff Flake, a RINO if there ever was one, plus his Arizona (un)stable-mate John McCain and their whacky RINO pals Lisa Murkowski (RINO-Alaska) and Susan Collins (RINO-Maine).
Given close to zero support from his own party and total stonewalling from the RINOs on his promised Wall, this cozying up act with the Democrats is at least in part Trump’s way of tossing a timber into the eyeballs of what passes for today’s Republican leadership.
Trump is essentially a lifelong New York Democrat who turned to the Republican Party for roughly the same reason, we suspect, that Ronald Reagan left the Democrat fold decades ago, stating, “I didn’t leave the Democratic party. The party left me.”
With all his stage histrionics, tweet-a-thons and gaucheries, Trump’s 2016 Presidential victory gifted the Republican Party last fall with a veritable political Rosetta Stone, the eliusive key to becoming the majority party for much of the remainder of the 21st century by embracing the legion of working class Americans populating this country’s vast, central “flyover country” region.
But, stubbornly remaining The Stupid Party, the Republicans have resented Trump’s victory ever since. Having gotten their wish – total control of Federal Washington – the Hill’s dominant Republicrats have whiffed every easy pitch Trump’s sent their way. In short, they won’t support their guy. So Trump may start turning to the Democrats to cram at least some of his agenda through.
If the Republicans want to save their own bacon, now might be the time to get more serious about Obamacare “repeal and replace” this fall, not to mention doing at least something about serious tax reform – the possibility of which got the post-Election 2016 market seriously juiced last November when Trump ran the electoral table.
At any rate, all this potentially productive political rejiggering – not Schumer and Pelosi alone – is likely what’s been juicing stocks at least moderately today.
Pretty much forgotten in all the purely political puffery was this afternoon’s milquetoast Beige Book report from the Fed, released at 2 p.m. but more than likely available much earlier to the elites, who, of course, are better and smarter than you or me. The so-called “Beige Book” is officially known as the “Summary of Commentary on Current Economic Conditions by Federal Reserve District.”
“…this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.”
The Beige Book is not exactly a thrilling read, filled as it is with loads of charts mostly incomprehensible to the layman, plus enough cascading numbers to numb the minds of even the most brilliant of mathematicians. But what’s interesting about this document is that it’s the closest thing we ever get to economics on the ground. That’s because each of the 12 Fed regions across the country provides a uniquely localized assessment of the segment of the U.S. economy that resides in each home region.
Since each reason can vary widely, the Beige Book is perhaps the closest thing to a real-life anecdotal assessment of what life is currently like for the average working stiff in each region. Tellingly, one region’s story can largely vary from the next, providing insights as to what’s going right and what’s going wrong in various regions at various times.
In short, these reports tell us exactly where the country as a whole is falling short, economically speaking, something we never hear about in D.C., which is constantly trying to cram the rest of the country into some kind of happy liberal narrative that’s only taking place in wealthy enclaves on America’s East and West coasts.
Anyhow, we digress, as usual. Today’s Beige Book, or at least what we’ve seen of it, may also be adding somewhat to the stock market’s relatively buoyant mood Tuesday, given its lack of direction with regard to that threatened third interest rate hike the Fed has been promising before 2017 draws to a close.
Taking today’s report as an ironclad guarantee that interest rates will stay put until some time in 2018 at least, investors – more likely their machines – have decided today that they’re home free now.
But they’ve forgotten that a subtler way of interest rate tightening may already be underway or nearly so: mainly, the slow, stealthy, but steady selling by the Fed of bonds and related securities it purchased over the years to inject loads of free money back into the system. This action, of course, will slowly drain money from the system, which will inevitably lead to automatic interest rate hikes anyway, or something like them.
The moral of both today’s stories – the debt ceiling issue and the Fed’s allegedly benign Beige Book release – is the same as it’s always been in Washington: Never listen to what anyone says. Instead, watch what they do.
We’re leaving the portfolios alone today, save for adding a tiny amount of shares from our thus-far sickly investment foray into the Guggenheim equal-weight healthcare ETF (symbol: RYH). It’s just a defensive crap shoot. But in a market where nothing is consistent, it’s the best we can do right now.