I don’t catch much CNBC anymore but in the 5 minutes I saw this morning I caught this clip which featured Rick Santelli and Larry Levin. Always have been a fan of Santelli and I do like Levin for his propensity to tell it how it is. (Jun 29, 2009: Larry Levin – the Visible and Invisible Hand is Everywhere) I did not see the clip preceding this one that they refer to at the beginning of the piece, but I concur that the real economy (not the “subsidized by Fed/government handouts” economy) is so weak, I don’t expect any Fed rate hikes in 2010. So if you are in the camp that as long as the Fed hands out money in every direction we just are on the path to a new bubble and stocks will benefit; you are in good hands.
Obviously this will end badly (again) but since in our strategy we are fine making money from either the long or short side, we’ll let the long only managers enjoy the “good times are here again” circus created by paper printing – and then someday when this all comes crashing down again, we’ll make money on the downside. Going off past history it will take the Fed beginning to take the punch bowl away. The long only crowd will be crushed, and then we’ll ask the Fed to create even more new free money to get us out of that crash. And we’ll just keep repeating this formula because that is all we know.
Speaking of free money we await the Fed to tell us this afternoon they see themselves handing out free punch for an ‘extended period’ – blah blah blah. Then we can rally and start the run to Dow 10,000, S&P 1100.
I do want to bring this clip to the site to show how the traders mindset about all this is – I think Larry reflects the thought process. If you are confused why fundamentals don’t matter – just remember everything comes down to basic economics. X amount of stock in the world, chased by Y amount of fiat money. You create more fiat money, prices of a relatively fixed supply of anything (commodities, stock certificates, whatever) go up. By trying to avoid deflation in the real economy all we are seeing is assets being marked up in the Wall Street economy and a false sense of prosperity in economic figures. Take away all the government and central bank props and you’d see reality. But we can’t handle the truth so we won’t do that.
“The fundamentals are a joke… ” as Larry opines – pretty much sums it up.
