Thoughts

Computers don't sleep, don't get tired, don't care about politics and don't celebrate Rosh Hashanah or Yom Kippur.

So be prepared for some sharp moves in the days ahead as some market participants are in Temple on Thursday and Friday!

Elizabeth Warren to Head Bureau of Consumer Financial Protection?

I am hearing that Elizabeth Warren might be shortly appointed head of the Bureau of Consumer Financial Protection.

This rumor might account for the weakness in credit card stocks today.

Government to Sell LNC Warrants

The U.S. government is planning to sell the Lincoln Financial warrants it owns over the next few weeks.

Political Battlefield Limits Upside

I find it hard for valuations to expand and for the S&P 500 to make much progress above 1,150 this year.

"These are the folks whose policies helped devastate our middle class and drive our economy into a ditch. And now they're asking you for the keys back."

-- President Obama's speech on Monday

"We don't need more government 'stimulus' spending. We need to end Washington Democrats' out-of-control spending spree, stop their tax hikes, and create jobs by eliminating the job-killing uncertainty that is hampering our small businesses."

-- Congressman John Boehner (R-Ohio), House Republican Leader

Yesterday President Obama announced a $50 billion-plus infrastructure program, which included a pointed campaign season assault on the Republican party. (Later in the day, it was reported that businesses would be allowed to expense capital expenses.) The GOP's leaders immediately assailed the administration's proposal of more federal spending as ineffective.

With the administration's ongoing and committed populist message/rhetoric at such close proximity to the midterm elections (and the Democrats very wobbly), one has to wonder why the President continues to launch these fiscal chip shots. To use the words written by Paul Krugman in the New York Times -- President Obama may simply not have the "intellectual clarity and political will."

Many Democrats have obviously over rated Director of the White House National Economic Council Lawrence Summers' critical thinking and the dogma and seeming class warfare incorporated in Obama's ideology.

In light of the growing friction between parties and with so much at stake in House and Senate, nothing substantive on the jobs front will likely get done by year-end.

Barring an unlikely transformative fiscal initiative that is focused on jobs growth (which I had been hoping for), I find it hard for valuations to expand and for the S&P 500 to make much progress above 1,150 this year.

In stating the obvious, there is clearly no incentive on the part of Republicans to be cooperative, and there is no political interest on the part of Democrats to deviate from their populist views.

So, absent an exogenous event, the year's lows have likely been put in, and stocks could move modestly higher. That being said, with too combative a political situation (rendering impactful 2010 fiscal policy effete), still elevated unemployment and absent much economic momentum, I can't find a P/E-enriching market catalyst that will push equities to the levels that many optimistic strategists are anticipating.

long LNC