Tuesday, October 4, 2011

When Politics Trumps Economics

Years ago, I was asked to write a quarterly column on the economy and the stock market for Inside Business.  It is that time again, and my deadline is Monday.  Subject to change, I'm thinking the theme will be the triumph of politics over economics.

Yesterday was a good example.  Even though the ISM data and car sales exceeded expectations, the stock market ignored both and tanked anyway.  All that matters is the inability of Europe to control their crisis, which has metastasized from being a financial crisis into a political one.  This follows on top of the inability of U.S. politicians to agree on much of anything either.  Don't forget we have the return of Debt Debacle II in December, after the Super-Committee submits their report at the end of November.

Benjamin Franklin once said "it profits a man little to see either his sausage or his laws being made."  Frankly, watching sausage being made would be beautiful in comparison in this environment.

The commonly accepted definition of a bear market is a 20% drop.  Today, the S&P is down 19.4% from its April high.  Asia was down badly overnight, and Europe is down another 2-3%.  Futures indicate the Dow will open down another 120 points this morning.  Wouldn't you rather watch sausage being made?

I miss economics!