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Special Report
Stocks Support Sequester
When enough Republicans stand on principle, the market responds in a big way.
(Page 2 of 2)
So my advice to John Boehner, to Republicans who act as if they really think sequestration is a problem: relax, watch the market (without putting too much emphasis on any one day), and know that while the sequester isn’t great policy, it is a real victory to have even a modest reduction in the growth of government spending under this president.
The harder part, especially for a messaging-challenged GOP, is to explain to the wider electorate what stock prices are already saying: that things are not as bad as they feel, but that they would indeed be that bad and worse if Republicans were not keeping Barack Obama and Harry Reid from injecting greater doses of anti-free enterprise poison into the slowly-recovering body politic.
Photo: UPI
About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver’s NewsRadio 850 KOA at 11 AM on most Sundays. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.
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aware| 2.28.13 @ 6:31AM
Sequester has absolutely nothing to do with the current "rally" in stocks. It's all about the printing.
The day of reckoning is coming and you will be crushed, Ross.
Arnie| 2.28.13 @ 7:14AM
"To be sure, markets can be wrong."
That's the smartest line from this whole article.
And in no way did Republicans taking the House (they actually take their seats in January) lead to the employment rate dropping. They didn't pass any economic bills that changed policy during the previous Congress. In fact, most economists agree that they harmed the economy in 2011 with their debt ceiling shenanigans.
As for the sequester, it's nice to see that the Pentagon can finally get a hair cut.
Moe Blotz| 2.28.13 @ 7:31AM
Actually the Pentagon civilian employee work force has grown 17% during the reign of Skeets and surely is a waste of money. If our defence spending were confined to our armed forces and the materiel they need, the Pentagon budget would necessarily be smaller. Too bad the budgets proposed by the Republican controlled HoR have gone to the DemocRAT controlled Senate and died with no debate or counter-proposals. Most economists yer arse, you quote Krugman and look a fool. (_!_)
Arnie| 2.28.13 @ 7:53AM
Yes, and a could thing too. The unemployment rate dropped without any Republican bill!!!
So Moe, show me the evidence that the debt ceiling fiasco actually helped the economy.
Arnie| 2.28.13 @ 8:04AM
and a good thing too*
Moe Blotz| 2.28.13 @ 9:09AM
Where did you get the insane notion that I would support such an inane proposal? The debt ceiling fiasco just added to market confusion and was uncalled for.
Arnie| 2.28.13 @ 9:31AM
Ok, well I read from your text you thought it was beneficial. Sorry, I miss understood you.
On this subject, we are in total agreement. The debt ceiling fiasco, started by Republicans, was uncalled for.
TLP| 2.28.13 @ 3:26PM
We're good to go, Moe.
Life of Pi.
JD| 2.28.13 @ 6:37PM
A Leftist like Arnie, being incapable of grasping the possibility that Leftism might do more harm than good (or any harm at all), and also incapable of understanding that good might come from somewhere other than government, declares that the House could not possibly have done good in 2011 because they did not pass laws.
The reality is that good was achieved by slowing/stalling the Obama agenda, and the relative stability reassured the business community.
TLP| 2.28.13 @ 7:29AM
Now, you know that I love you like like you were my Sister, (who lives in a Nudist Colony in Florida) but methinks that thouest can'teth see'eth the Forest, for the Plastic Trees.
It's not real. As the guy on the Radio (who's always using my bits) is fond of saying: It's all just Plastic Banana good time Rock and Roll. The Market is sitting on a Foundation of Worthless IOUs, Printed Money, Unkeepable Promises, and Rose Coloured Glasses. Glasses that you seem to posses in abundance.
How long can Ben Don'tspankme keep doing the Weimar Hustle? How long can Ben Don'tspankme, and his Star Chamber, continue to Artificially keep Interests Rates down?
I'll answer the last one for you. They can't, because all of the NUMBERS coming out of Black Hitler's Bunker are as big a buncha lies as all of the WORDS that come from there. Energy Prices are Higher, which, by association, makes everything that uses Energy in it's Manufacturing and it's Shipping will neccessarily Cost More. Especially, the stuff Shipped from Asia.
The Forced addition of our Food Supply in to our Gas Tanks, is doing the same thing to every Food Item that uses Corn: Be it as Syrup, Flour, or as Feed for Livestock. I don't know where you live, but I saw Ground Beef at Stop and Shop yesterday, priced $5.99lb.
But, of course, they conveniently DON'T COUNT Food and Fuel in the Inflation Equation, just as they DON'T COUNT people who's Unemployment runs out, in their Jobs Report.
You need to take off those Glasses.
Moe Blotz| 2.28.13 @ 7:35AM
The latest news in the trucking industry is that freight rates are slowly rising, but the carriers' cost of operation is increasing faster. So everyone gets more for hauling junque, but nobody can stay in business to provide the service. Perhaps I will just stay home and drink the golden elixir whilst dreaming of better days.
TLP| 2.28.13 @ 1:33PM
Tomorrow.
James Bowman's House.
Be there.
TLP| 2.28.13 @ 1:34PM
Bring chuck, his Brother chuck, and his other Brother chuck.
Moe Blotz| 2.28.13 @ 3:35PM
Who is going to bring upchuck?
TLP| 2.28.13 @ 4:31PM
We're open right now.
chuck| 2.28.13 @ 8:00AM
Well stated TLP.
We live in the real world, and see just how shitty it is. Higher prices for fuel, food, supplies. I'm a contractor, and the prices of all my supplies are going up. Nails are sky-high right now. Everything is going up except the prices we are able to charge our customers.
Meanwhile, Ross lives in a world of charts and graphs. You're right Tim, take out QE1, QE2, QE3........and the market is back down below 10,000.
You know Ross, if we all lived in Zimbabwe, we'd all be quadzillionaires!
drudge ette obama| 2.28.13 @ 8:11AM
Chuck, you live in the real world, as do I. The stock market is headed high for no reasonable reason. Why anyone, except a risk taker or manipulator, would buy now, is anyone's guess.
The answer is to minimize your exposure, keep expenses low and don't extend much credit to those who won't pay you back, forcing you into bankruptcy. This has happened to many since the housing bust. Permits declined, business bankruptcies soared - and any recovery that you see now is based on "bust values" not pre-bust values. Have you shopped recently and seen the hikes in food prices? It is shocking what the new normal is. I have reduced spending. This all leads to a recession and lower growth. Can we get to a negative GDP? Serious times are ahead. Get your noses out of Good Morning America and pulp tv (except for Walking Dead - that will teach you survival skills).
Pecos Pete| 2.28.13 @ 8:33AM
Tim: Absolute agreement from me. Well said!
TLP| 2.28.13 @ 1:35PM
See you at Bowman's House.
Von Mises Jr| 2.28.13 @ 9:11AM
What this phenomenon illustrates is that the stock market is not directly correlated to economic markets. It is the socialist kabuki dance of Keynesian Economics that tells economic illiterates in DC that zero interest rates and QE will increase employment when in fact it does not and only creates inflation. So while the stock market increases as a massive bubble, average Americans do not have work and see higher prices. Keynesian nonsense tells the Ruling Class that government spending will increase GDP (or at least that is what they are proclaiming). But the more government spending we see, the lower the GDP growth. And if anything should frighten people is that if 90% of the Bonds are being bought by the government, it means that nobody in the market trusts the redemption or at a minimum they expect a negative net return.
Things are so dysfunctional now, the only thing we can do TLP is to batten down the hatches. Some people are going to be hurt real bad. The objective is not to be one of them. Things always reset and to own your house, have paid off your credit cards, owning gold and silver, as well as being well stocked with food and ammo is the key.
Just as in Sodom and Gomorrah that I mentioned yesterday, it is a morality issue. If you partake in the greed and lust, you shall be rewarded with fire and brimstone.
TLP| 2.28.13 @ 9:14AM
U.S. Economy grew ny 0.1% in the Fourth Quarter.
Imports down, exports down, consumer spending down, manufacturing down... and thank God the inflation numbers don't include food or oil prices.... otherwise we'd be hurting.
But, the Stock Market is BOOMING!
Hello?
Von Mises Jr| 2.28.13 @ 10:11AM
Actually, my friend it contracted by one-tenth of one percent. But rumor is already circulating that it will be revised. Normally they revise it down after the fact to misrepresent things as better than they are initially. But this time they will adjust it upward since the definition of a recession is two consecutive quarters of negative GDP growth. We may very well have even a worse first quarter without Christmas and other transactions to avoid higher taxes. But will they tell the truth? I think not in either case!
TLP| 2.28.13 @ 11:09AM
I got it from Drudge/Wall St. Journal - Market Watch.
TLP| 2.28.13 @ 11:10AM
Why would they Tell the Truth?
Von Mises Jr| 2.28.13 @ 11:32AM
"Stronger residential construction and an improvement in net exports pushed growth into positive territory."
This is the revised number. I knew what was going to happen before it happened.
Don't doubt me, as Rush would say. I told this to my wife for over quarter century and she still will not listen.
This is how they confuse and lie. They change statistics after the fact and conflate different sources. So now even if the economy shits the bed in Q1, the regime will say we are still in a recovery. It's freaking magic, my friend.
TLP| 2.28.13 @ 1:38PM
Whaaaaaaaaaaaat?
Your Wife doesn't listen to you?
Welcome to the Club.
Bowman's House, tomorrow.
Albert Constantine Jr.| 2.28.13 @ 7:34PM
"I told this to my wife for over quarter century and she still will not listen."
We can make this roster shorter, with the list of those who have a wife who does listen.
Al Adab| 2.28.13 @ 8:39AM
Businesses and investors (the market) always do find a way around the regulations and manage to operate in spite of the best efforts of the centralizers to stop them. Consider however just how great are the retardant effects on the overall size and strength of the economy. what would the Dow or Nasdaq be without and how large the economy and GDP without?
TLP| 2.28.13 @ 3:27PM
We're good to go.
Life of Pi.
TLP| 2.28.13 @ 4:32PM
Bowman.
Hardcard| 2.28.13 @ 8:41AM
The markets are being manipulated by benny bernanke and the FED. Bogus interest rates are the norm, buying the US debt with funny money is common practice, the mint is running full speed, soros is smiling, buffet is buying. At this point what difference does it make, as reported by the cattle futures queen (not barney fwank). You didn't build it, as per, obamao djingo our dear and gifted leader, who has transformed our great republic into a cash cow for the elites in government. When obamao wants financial advice he turns to jon corzine, and this is what we got! chuck u shumer is the champion of the 2nd amendment, boobie menendez is protecting the rights of women in business, I think you have to read some of this crap on the floor of congress to know whats in it? What me worry?
TLP| 2.28.13 @ 1:39PM
Bowman's House.
TLP| 2.28.13 @ 3:33PM
Life of Pi.
Peppermint Tea | 2.28.13 @ 9:05AM
Ross,
The stock market rose in Weimar, too. Why not? It's counted in funny money you know.
And don't worry about your 401k and pension, it will all be there and paid in funny money as well.
The price of EVERYTHING goes up, even at the Chicken Ranch, wherever the hell that is, and yet there is no inflation. Damn, the President must be a god!
Pecos Pete| 2.28.13 @ 9:28AM
Repeat after me: There is NO inflation! There is NO inflation! There is NO inflation! There is NO inflation! There is NO inflation! There is NO inflation!
Etc.
TLP| 2.28.13 @ 3:29PM
We're good to go.
Life of Pi.
Ross Kaminsky| 2.28.13 @ 9:43AM
OK, guys, I get the idea. Let me jump in here with a few brief thoughts:
1) I do agree there will probably be inflation, but you also have to remember what inflation is (in terms of economic definition, which is quite different from how we may feel it every day.) In short, it's a broad and persistent increase in prices. If there is a one-time jump in prices, it will look like inflation for a very short time in the numbers and then go away even if prices stay high.
2) I agree with the implication that the real threat of Bernanke's policy, and one which ties directly into the inflation threat, is to the value of the dollar. Somewhat surprisingly, the value of the USD is roughly the same today as it was a year ago and two years ago.
You can see some of the fear of a dollar collapse dissipate by the huge drop in gold prices in recent weeks.
3) I stand by my assertion that the GOP taking the House was a positive for the economy. No, they didn't pass any bills. But they stopped Obama from passing more terrible stuff. For example, if the Dems had the House now, we might get cap-and-trade, which would make Obamacare look almost harmless.
4) I agree: own guns.
John II| 2.28.13 @ 10:01AM
Probably be inflation? As in the sun will probably rise and set tomorrow?
I took ALL my retirement assets out of the stock market the day after the election. They're staying out.
Well, I kept a thousand shares of Intel just for old-time's sake--but that's all the sentiment I can afford: the rest of it is now in a glorified annuity savings account at 5.8% and that's where it's going to stay, even when inflation passes 6 percent. I'm an old man, Ross. Inflation, probable or otherwise, hurts people like me a lot.
Actually, you lost me with the cheesy Chicken-Ranch metaphor. The underlying trouble with the economy is moral, not economic. Obama's wicked policies are a symptom of Obama principal role as avatar of a social order precipitously on the skids.
Ross Kaminsky| 2.28.13 @ 1:13PM
John,
If you're in retirement, then not having too much in stocks makes sense, and a 5.8% guaranteed return is very good these days.
At least your fixed income portfolio isn't invested in variable rate products, which the Fed has destroyed!
No doubt inflation is very bad for retirees, and even worse if we get inflation along with no opportunity for retirees to put money in safe, liquid funds which pay more than a fraction of a percent in interest.
As for the Chicken Ranch metaphor, sometimes you just have to have a sense of humor, John.
Just ask TLP!
TLP| 2.28.13 @ 1:41PM
Are you coming on to me?
Stkman| 2.28.13 @ 2:13PM
That would make two of you doing on you wouldn't it?
TLP| 2.28.13 @ 3:34PM
Contest at Bowman's Life of Pi.
TLP| 2.28.13 @ 3:34PM
Smartass.
Moe Blotz| 2.28.13 @ 3:38PM
A real smart ass can sit on an ice cream cone and tell you the flavour.
TLP| 2.28.13 @ 4:33PM
Get thee to The Contest,
Life of Pi.
John II| 2.28.13 @ 11:01PM
If I HAD to have a sense of humor, I'd refuse to have one. I'm that ornery.
Joseph Epstein once characterized the principal difference in the political divide thus: The Left is humorless, and the Right is flippant.
The very idea, suggesting that I have no sense of humor. You realize, of course, that I intend to take this matter up with my attorney as soon as she gets out of law school.
Pecos Pete| 2.28.13 @ 10:02AM
Ross: I agree with #3 and #4. Still not sure where you stand on future inflation.
Al Adab| 2.28.13 @ 10:55AM
Don't forget, when the govt. issues inflation figures the count does not include cost of food or gasoline. Where we might ask will consumers first feel the effects? Hmmm.
Ross Kaminsky| 2.28.13 @ 1:16PM
Al, they cut those out of the "core" rate, but they do report inflation with those as well. I agree that the rate which include those numbers should be more publicized than the core, esp. since energy prices filter through to almost everything else we buy except housing.
Pete: I think that the prospect of future inflation depends greatly on how far behind the curve the Fed gets in unwinding their balance sheet. If Bernanke or someone like him stays as Fed chairman into the next presidency, I would be quite worried.
I think Bernanke is a villain, not a hero. And if you see how the view of Greenspan turned from hero to goat, I think the eventual view of Bernanke will be even worse.
TLP| 2.28.13 @ 1:46PM
I saw a guy on one of these Stories, who says he's a Builder. Everything he uses Costs More: Nails, Lumber, Shingles, (Not the kind on your thighs. The Roof kind) Screws, Insulation, you name it.
And, yes, that's a direct correlation to Gas Prices, as I said, earlier, in my Groundbreaking Comment, above.
Al Adab| 2.28.13 @ 1:57PM
Ross:
Thanks for the correction. It would be best to report the overall rather than core rate and yes, the price of transportation is visible every day in the stores.
DRed| 2.28.13 @ 2:04PM
No, it wouldn't be best. It would be misleading. Changes in the price of food and gasoline are often affected by changes in the supply of those goods. Price changes caused by supply of a good don't affect inflation. If there's an oil shortage, say, gasoline will be more expensive, but a dollar will have the same purchasing power for all other goods (everything else being equal)
Ross Kaminsky| 2.28.13 @ 2:59PM
DRed, that's a really stupid comment. The price changes in EVERYTHING are caused by changes in supply and demand.
Also, if oil goes up a lot, the price of everything that requires gasoline or diesel or oil to make or transport will also go up, which basically means the price of everything that you buy at a store. It might not go up a lot on any one item, but in the aggregate you're talking about an enormous amount of money.
TLP| 2.28.13 @ 3:36PM
Contest at Bowman's Life of Pi.
DRed| 2.28.13 @ 7:14PM
Well yes, but short term fluctuations happen to the price of oil all the time-they generally have nothing to do with inflation. But yes, a long term change in the oil supply could lead to inflation. I should have used a different example.
While it's true that supply and demand change the price of a good, that's not what inflation measures. Inflation measures the change in price of goods broadly across the economy.
My point is there are valid reasons why energy and food prices aren't used to calculate core inflation. It's not a conspiracy to dupe people, which is what a lot of conservatives seem to believe. And that's also stupid.
TLP| 2.28.13 @ 3:37PM
You really are Stupid, aren't you?
TLP| 2.28.13 @ 3:38PM
That was for DickRed.
Arnie| 2.28.13 @ 10:22AM
"I stand by my assertion that the GOP taking the House was a positive for the economy. No, they didn't pass any bills. But they stopped Obama from passing more terrible stuff. For example, if the Dems had the House now, we might get cap-and-trade, which would make Obamacare look almost harmless."
Ross, you are admitting the Repubs elected were unable to change anything after the 2009-10 Dem dominated Congress. And that Congress passed a lot. Not only O-care, but also, financial ind. reform, credit card reform, mortgage/housing assistance, the stimulus, PAYGO rules, Hiring Incentives Act, Food Safety Act etc.. If the Repubs changed nothing from that time, that means essentially the Dems owned the economy. And the public rewarded them and Obama because it improved (still not great, but much better than the job hemorrhaging last months of W).
And to be clear, Cap and Trade was attempted during the 111th Congress of the Dems. It passed the House, but they couldn't even get it passed among the Dems in the Senate, because there are several coal state Dems.
So the fact that Cap and Trade didn't happen wasn't only due to GOP. In fact, they were largely irrelevant.
All the 112th Congress with the Tea Party freshman managed to do was create gridlock and animosity. That was their biggest accomplishment/fail, however you want to see it.
They also wasted time and money, spending millions of dollars trying to repeal Obamacare when there was no practical way of doing that.
Al Adab| 2.28.13 @ 12:44PM
Gridlock and animosity are fine in my book. The less active the government in passing laws and spending the better off the nation. Animosity stems, correctly, from the almost completely incongruent belief systems of the two parties. One party must be and both may be wrong but the strength of the nation, internally and externally, is most critical.
TLP| 2.28.13 @ 3:38PM
Bowman's Life of Pi.
Ross Kaminsky| 2.28.13 @ 1:18PM
Arnie,
with the bigger Dem majority in the Senate now, I think they'd try some version of cap-and-trade again if they take the House.
I have said twice now that the GOP stopped Obama just by taking the House. Of course they didn't get conservative legislation passed in the Senate or signed by the president. But that's not the point and I don't see why you keep missing the fairly obvious point I was making.
TLP| 2.28.13 @ 1:48PM
They're already doing Cap and Trade via the EPA, and the Regulation Route.
TLP| 2.28.13 @ 1:49PM
And, you can throw in the Closing of Coal Mines and Coal Fired Electrical Generating Plants, as well.
Ross Kaminsky| 2.28.13 @ 3:00PM
All true, TLP. All I can say, and you'd probably agree, is that if Dems had the House too, it would probably be worse, and probably harder to eventually undo.
TLP| 2.28.13 @ 3:40PM
No question.
Contest at Bowman's Life of Pi.
This is a chance to redeem yourself, in the eyes of the Great Unwashed.
TLP| 2.28.13 @ 3:42PM
And, he misses your point, because he's a Moron.
Drunken Sailor| 2.28.13 @ 1:52PM
Ross,
Arnie doesn't miss it, he ignores it as it doesn't promote his agenda.
DRed| 2.28.13 @ 2:49PM
In 2009 supporters of cap and trade spent roughly 22 million dollars in lobbying and campaign contributions. Their opponents spent roughly 210 million. You don't need a Republican controlled congress to defeat cap and trade legislation.
Drunken Sailor| 2.28.13 @ 3:38PM
I wish you guys would make up my mind. First you claim the Republicans are blocking all of Obama's progress, now you're claiming they had nothing to do with it. Do any of your talking points stay consistent?
TLP| 2.28.13 @ 3:41PM
Contest at Bowman's Life of Pi.
Bring your Monkey.
Drunken Sailor| 2.28.13 @ 4:19PM
I always bring my monkey.
TLP| 2.28.13 @ 4:35PM
Don't you mean: I always SPANK my monkey?
DRed| 2.28.13 @ 7:18PM
First of all, I'm not all liberals, DS. Cap and trade isn't going to happen any time in the near future, because there's far too much money opposing it and there's no groundswell of public opinion in favor of it. It might well be true that with a Democratic majority in the house some other sort of cap and trade legislation would be proposed, but it would have almost no chance of passing. All that money buys a lot of congressmen.
Drunken Sailor| 3.1.13 @ 8:46AM
"All that money buys a lot of congressmen"
On both sides of the aisle. On that we can agree.
Stkman| 2.28.13 @ 2:17PM
Who all remembers when the Japanese were paying $7.00 for a Big Mac meal deal in the 80's and we all laughed. Yes, there's inflation and it's bigger than any of us are admitting. The stock market is manipulated by the wealthy and the middle class trying to save for retirement get's F'd to death. The only winners lately seem to be politicians and the very wealthy. Same as its always been though. They always win, and those of us who work hard and play by the rules end up wearing Tims dirty underwear.
Ross Kaminsky| 2.28.13 @ 3:01PM
Don't forget that millions, tens of millions, of middle class Americans own stocks in their pension and retirement accounts. Even liberals, even union members, even university professors...
Moe Blotz| 2.28.13 @ 3:44PM
"The rich" are not the only ones who benefit from an active stock market. My brother parlayed a few modest investments of five to ten thousand dollars into a modest portfolio of $300,000.00. He bought stocks of companies he liked and it paid off. Small scale investors can reap benefits from an active stock market as well.
JD| 2.28.13 @ 6:41PM
Don't nip around the edges. The simple fact is that were it not for public ownership, most of our economy wouldn't exist. It's not their piddling dalliances in stocks that the poor owe to markets - it's most of their jobs.
hrgfue | 3.3.13 @ 10:37PM
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Mr. O'Ciernan| 3.10.13 @ 7:32PM
At face value, this trend would seem to be really shocking. According to conventional wisdom, less government spending means less output and a slower economy. A double standard in economic thought among prominent economists demonstrate why the sequester is not having a large impact on the economy. According to Paul Krugman, a prominent liberal economist, $800 billion of government stimulus following the recession was insufficient to make a meaningful impact. http://krugman.blogs.nytimes.c.....-stimulus/ Now that $85 billion could be eliminated from future budget projections, Krugman argues "this would hit the nation with a double whammy, reducing growth while increasing injustice. " http://www.nytimes.com/2013/02......html?_r=0 Krugman can't have it both ways. If $800 billion doesn't affect an economy, than $85 billion can't either. The economy's recent performance indicates that he is blowing the impact of the sequester out of proportion.