WASHINGTON, June 6, 2012 – The market is likely to continue its nonsense today, building a short covering rally on…whatever. As of 11 a.m. EDT (we’re late writing this for reasons that will become apparent), the market is up a cool 156 points, although that could reverse during the close. The convincing win by Wisconsin’s Republican governor Scott Walker is as good a reason as any for today’s irrational exuberance, and it certainly didn’t hurt this market which has been burdened with terminal uncertainty for nearly four years running. Let us explain.
Within the last few decades, the Democrats, immensely aided by endless infusions of money from both unions—specifically public employee unions—and illegally operating left-oriented “nonprofits”—have either been narrowly winning elections in key states by buying votes, stuffing ballot boxes, or just plain smearing and slandering Republican opponents.
The object of the game: if the Democrats win, whether locally or nationally, they continue to consolidate power to reward financial donors and increase taxation on their constituents, the better to reward financial donors. If Republicans get lucky and occasionally beat the Dems, the object of the Dems is to either slow-roll, halt, or crush Republican initiatives for as long as it takes to win—or steal—majority control back.
The result of this cynical refusal to allow victorious Republicans to govern has been de facto Democrat control of most of the U.S. for at least the past fifty years with the notable, albeit brief exception of the Reagan years. Even with Republican majorities in state houses and in Washington, as during the Bush I and II years, the Republicans have ultimately been unable to do much to stop this entrenched Democrat juggernaut as most Federal and state-employed bureaucrats, as members of public employee unions, work 24/7 beneath the radar at times to thwart nearly all Republican initiatives until Democrats can return to power once again.
In other words, government employees work with the Dems when Dems are the bosses, and actively but quietly thwart Republican interlopers when, for some reason, Americans go loco for an election or two and somehow get stupid enough to elect Republicans to office.
If you think these observations are cynical and, for lefties at least, unfair, think again. From the time of Lyndon Johnson to the present, no matter who’s inhabited the White House, the Democrats and their union friends have steadily advanced their Eurostyle socialist agenda, taking over not only local, state, and national bureaucracies, but also corrupting nonprofit foundations, the entertainment industry, academia, and the judiciary, making it impossible for any other discipline to prevail no matter what voters say in a given election.
Quite unexpectedly, this naked lust for power came to an ugly head over the last two years in Wisconsin where cheese heads went, quite literally, head-to-head to bring an end to something the public employee union-Democrat hegemony that any sentient human being knew must come to an end lest Wisconsin go completely bankrupt. In 2010, they threw the Democrats out and decided to give the Republicans a chance.
But when the Republicans actually tried to do something to rein in out-of-control public employee union pay, benefit, and pension packages—none of which private sector employees of the state could come close to matching—the Democrats, comfortably bankrolled, as always, by the deep pockets of the public employee unions—did what they always did: prevented the Republicans from governing even though the Republicans had just won their most recent elections fair and square.
From rowdy demonstrations; to physical intimidation of legislators and their families; to the cowardly decamping of State Senate Democrats to nearby Illinois to thwart a quorum in a vote they knew they’d lose; to the endless, and taxpayer costly, recall elections carefully targeted first to remove shaky Republican senators and, ultimately, the governor and lieutenant governor themselves, Democrats and union thugs went all out for two years running to regain power and complete their destruction of Wisconsin’s economy. Just because. Just because they felt entitled to power no matter that Wisconsin’s citizens had decided otherwise in 2010.
This is what the current political game has come down to. Raw power. Democrats no longer regard themselves as public servants. They regard themselves as America’s rightful rulers: governors, legislators, and Presidents for life in effect. Sadly, this is precisely what destroys democracy, and that’s what we’ve been watching in slow motion now for decades.
This lust for pure power is also on display in Washington for all to see. It’s most visible currently in the entirely useless U.S. Senate, “led,” more or less, by Majority Leader Harry Reid. Realizing that he and his Senate colleagues are stuck between Scylla and Charybdis, Mr. Reid apparently came to the conclusion about three sessions ago that supporting President Obama’s initiatives was certain suicide (as it was for many of his colleagues in 2010) and helping the Republicans actually pass anything was an impossibility given that no Republican is ever fit to govern. Hence, no budgets for three fiscal years running now—absolutely astonishing in a country that, however weakened, still has the greatest economy in the world.
Why all the politics today? Simple. One of the main reasons the market has been stuck in wash, rinse, repeat for nearly four years now is that, effectively, there’s been absolutely no Federal economic policy at all, save for the impending disaster of Obamacare which, we fervently hope, the Supremes will make short work of later this month. Coupled with the even worse uncertainty in Europe and the Communist-faux-capitalist muddling in China, this has led American businesses to maximize profitable efforts while minimalizing employment as every potential new employee now means being saddled with potential and as yet unmeasureable new liabilities.
It’s this uncertainty that has industry sitting on its hands. Republicans and conservatives (not always one and the same) love to pile on Fed Chair Ben Bernanke’s successive issuance of Quantitative Easing measures (QE). But the fact is this: Mr. Bernanke has been doing his part to provide liquidity to a fragile system while in diplomatic language, begging Congress and President Obama to get off their collective derrières and help him out with job-creating legislation. But, without a budget for three years running, Mr. Obama and Mr. Reid are content to let companies and workers rot while trying to make the Republicans look bad for the next election cycle. In other words, screw the economy and screw the unemployed. We Democrats need to retain power forever. Just because. And if the voters don’t comply, then the hell with them.
Yesterday’s primary vote in Wisconsin thus brings us a bit of hope. While typical, lying newspaper headlines are going along the lines of “Walker survives recall vote,” the crushing reality of yesterday’s tally, based on nearly complete numbers now, gives Wisconsin’s governor at least a seven percentage point victory margin—larger than his five percent margin in the actual 2010 election. Ditto his Lieutenant Governor counterpart. With regard to the magnitude and decisiveness of this Democrat defeat, you don’t have to believe us. Just check out the following video of a bitter, leftist crybaby. If you don’t believe us, check out this video from The Blaze via Gateway Pundit, in which a sobbing socialist defines democracy as something that’s apparently only for Democrats:
But wait, there’s more! In the following YouTube video, we see Milwaukee Mayor and two-time Walker foe Tom Barrett assaulted by one of his own supporters. The diminuative woman you eventually see in the photo is said to have berated the Mayor for conceding the election before “all” the votes were counted. (Presumably including the ones that were bused in from out-of-state.) When he asked for a hug, she bitch-slapped him instead. Among their other virtues, today’s Dems apparently no longer believe in good sportsmanship except when they win, but probably not even then. It’s another in a long string of examples pointing to the arrested adolescent attitudes that seem to dominate this party today.
Yes, there’s still a little ambiguity in Wisconsin. Another batch of recalls apparently netted the Dems a thin one-vote margin in the State Senate. But all seats have to be defended again this fall, and the legislature doesn’t officially have to meet again until January, so at this moment this is a Pyrrhic victory.
The bottom line was the victory of Scott Walker. Wisconsinites of all strips apparently had become entirely fed up with public employee union thuggery and the ruler mentality that prevailed among the ranks of Democrats and their supporters.
More importantly, by voter for Walker, they supported the most important aspect of the legislation that reined in, at last, the ludicrous devil’s bargain between the public employee unions and the Democrats they bought and paid for. For decades, the state has religiously deducted union dues from public employee union paychecks, providing a direct conduit of money back into their own campaign coffers if they loyally backed the unions’ every demand.
The deduction is now history. And, by the latest estimates, upwards of fifty per cent of state employees have opted out of paying union dues, eviscerating the heretofore-bottomless campaign coffers of state Democrats.
In short, Wisconsinites finally realized over the past two years why they were continually and relentlessly being screwed by their own “public servants.” So they effectively acted to begin de-funding illegitimate crony government that perpetuated its interest and not the interests of the average Wisconsin worker.
To the extent that states, and, ultimately, the citizens of the U.S. come to the same realization as Wisconsin’s cheeseheads, we will perhaps witness this fall the gradual unraveling of the Democrat-union-socialist-eco-fanatic system that’s brought this country to its knees.
That, in turn, would be hugely bullish for the markets. Governor Walker’s near-landslide win—far from mere survival—may not really be the direct cause of today’s current market rally, which may or may not survive into the close. But it certainly is cause for some rejoicing, proving that in some precincts of America at least, the public is waking up to the real reason why they don’t have jobs. And that they might continue to do something about this country’s systemic political rot come this fall. That’s more than reason enough for at least a little bit of hope. And, perhaps, a lot of change.
We’ve gone on a bit here and the market is open and up a vigorous 150+ Dow points. So we’ll have to sign off now and get out of a couple well-intentioned short positions. This rally will be fun, but it may not last long, and it’s not time for irrational exuberance just yet. Europe’s congenital mess continues to bubble beneath today’s headlines, and who knows when it will surface again? Have a good one.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
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