Can Bush Rally the Country and the Markets? 9/13/2007
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Tonight President Bush will address the nation. This may prove to be the single most important speech of his second term and could shape the balance of his tenure as commander in chief. After two days of exhaustive testimony from General David Petraeus and Ambassador to Iraq Ryan Crocker the bitter political divide in this country seems to have grown into a chasm.
The left, with an uncanny penchant to shoot themselves in the foot, ran the inane “General Betray Us” full page ad in the New York Times. Soros and company fail to realize that Democrats are unable to employ swift boat politics? Democrats will continue to be even less popular that the current administration if they maintain this milksop front.
The right, on the other hand, must solidify their case for the continued expenditure of treasure and lives. Despite what they think, even the most ardent factions of the GOP are getting fed-up with this war. Bill O'Reilly, Rush Limbaugh, Laura Ingraham and the other venom spewing mouth pieces of the far right are just as out of touch with reality as the left is; they just shout louder.
Meanwhile, the vast majority of us, the ones in the middle are seemingly unrepresented. We are the ones paying for the war. We are the ones whose family and friends are serving this country with honor. We are the ones who want unpoliticized straight forward answers. It may be hard work and yes the answers may be difficult, but enough of the back biting fence sitting BS. Our sons and daughters, mothers and fathers, friends and colleagues are serving. Our future is being mortgaged. Our reputation is being decimated around the globe. What are the goals? How do we win? When are the troops coming home?
Without concrete answers to these questions, Wall Street will remain in its war-time trading range. New highs may be set, but not significantly higher. Goldilocks is currently on life-support after being hit by a bus carrying unemployed Americans. Downward pressures may lead to an eventual bear market and in all likelihood keep a new bull-leg in check. If a trader cannot look to the future with some semblance of certainty, gains are limited as there is a propensity to maintain a larger safety net in the form of cash and cash equivalents.
Next week the FOMC meeting commences on Tuesday. In all likelihood, a 25 basis point cut in the discount rate is baked into the cake. The Street is rooting for a 50 point cut, but that is highly optimistic.
Despite public perception the Federal Reserve is not beholden to the markets. Their prime directives and mandates are to fight inflation and foster economic growth. This begs the obvious question (one which we will be addressing in the Proving Grounds next issue) Why is the Fed cutting rates anyway?
Oil is at an all time high. Food prices are at an all time high. The Dollar is in the tank. Gold is surging. The Fed lives in an ex-food & energy world, but won’t a rate cut exacerbate obvious inflationary pressures. Moreover, is this rate cut a shift in long-term bias or is it a mere tweak meant to calm a sketchy and volatile stock market? Despite what Joe Q. Homeowner may think, a cut in the Fed Funds rate will not result in a decrease in their ARM.
L'shanah tovah
STANDARD TRADING GUIDELINES!
BUY LIMITS ARE GOOD TILL CANCELLED.
ALL STOPS EFFECTIVE ONLY WHEN THE STOCK CLOSES BELOW THE STOP PRICE.
ALWAYS SELL HALF ON A DOUBLE.
Please Trade Carefully.
Jeffrey A. Hirsch, Editor
J. Taylor Brown, Director of Research
http://www.stocktradersalmanac.com
