 The Obama Hammer
Bob Hoye
Institutional Advisors
Feb 4, 2009
Said quickly with a drawl it
comes out as "The Obama Hamma", which seems
appropriate. His attacks upon free trade and upon free speech
(with the rant against Rush Limbaugh) have been quick off the
mark.
The Administration, with Pelosi's
Congress seem to be bullying operators who will push the political
fabric to the limit.
The damage being done during
a relentless post-bubble contraction is bad enough, but to have
it made worse by political bullies intent to impose socialism,
under any guise, is going to add even greater distress to financial
markets. Until the groundswell for another benign American Revolution
builds up, perhaps the only constraint upon the full implementation
of brutal ambition will be financial dislocation, made worse
by political folly.
Socialists are a study. Feral
socialists who have been out of office for awhile seem even angrier
and more ambitious to impose policy than those naively new to
power. Eventually, they realize their mistakes and much like
a cat clawing the furniture - they can't help it and always look
guilty when reprimanded. Such full reprimand by market forces
could be some time off, and, in the meantime, no one's furniture
is safe.
Some observations:
- As Ross points out rebounds
in a lengthy bear can range from around 25% to 40% retracements.
- During the "Lost Decade"
following the Nikkei high at the end of 1989 there were 13 rallies
that accomplished a 25 percent retracement of the previous loss,
and there were 5 that did the 40 percenter.
The classic fall crash completed
on November 20, which was also the day that concluded the similar
crash that ended the South Sea Bubble.
In our case, the rebound out
to the first week of January amounted to 25% for the Dow, 22%
for the Toronto index and 24.5% for the Nikkei. Retrospectively,
this was too much - too soon, making markets vulnerable to the
discovery of Obama's true ambition.
Ironically and eventually,
protectionism has been one of the features of every post-bubble
contraction. After exaggerating speculation on the upside, politicians
are programmed to make things worse on the contraction. Comparing
well with cats and furniture, one following the 1825 mania was
called, in real time, "The Tariff of Abominations".
- We expected a number of bad
news reports about banks and the economy, but the addition of
Democrat folly has been quicker than we thought possible.
- Obviously, this, along with
the strength to early January, is impairing the returns possible
through the first quarter. This is regrettable, as after May
the damaging contraction has been expected to resume.
- We would maintain trading
positions established in November in Golds, Base Metal Mining
and Oils.
Feb 2, 2009
-Bob Hoye
Institutional Advisors
email: bobhoye@institutionaladvisors.com
website: www.institutionaladvisors.com
Hoye Archives
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