Cajoling the Markets
Government intervention and control of markets has a very negative cumulative effect.
The comparison of what Mr. Bernanke said to Congress..."the housing market slowdown appears to be orderly decline"...to what the CEO of DR Horton (DHI) said..."sales are falling off the Richter scale"...should say a lot of how the government attempts to cajole markets.
The company "senses there are three to four quarters of inventory adjustments ahead for homebuilders."
From the flawed statistics they release to their subjective commentary, I can't believe anyone still listens to them.
Government intervention and control of markets has a very negative cumulative effect. Easy credit allows unproductive companies to survive when they should not. It interrupts the system from cleansing itself which creates stronger growth in the future. Our economic growth becomes more and more dependent on speculation. All that stability investors "feel" is an illusion: the cumulative effect is actually very destabilizing.
There is much anecdotal evidence that investors have become very dependent on government to keep asset prices going higher. This is absolutely necessary for an over-levered economy so it can keep borrowing to consume.
This is where I differ from the bulls. They stay with shallow arguments that growth is this and earnings are that without looking at the why of it. The why of it is that speculation in asset prices is all that is driving growth (companies buying back stock with debt is helping earnings per share dramatically) and this is called a ponzi. It depends on the next guy paying a higher price.
When the next guy does not pay a higher price it falls apart. If asset prices like stocks start going down you will see how quickly growth stalls. Then all that leverage that the Fed has been trying to infuse will unwind. The markets that they have "controlled" will control them.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter