Seeking to Explain the Market's Dour Mood

Well, well… it’s a “risk-off” day in the markets. Let’s look at some quick numbers:

  • All the major U.S. stock indexes are down at least 1%. According to Bespoke Investment Group, the last time the S&P opened down this much was Nov. 21
  • Gold is down another 2%, to $1,671. Silver’s back below $33
  • Oil is down to $104.83, a two-week low
  • The dollar index is back to a three-week high at 79.8; the euro has settled back to $1.313.

The financial media are explaining away the sell-off with… [shaking the Magic 8 Ball]… Greece! Yes, that’s it! Private holders of Greek bonds have to decide by Thursday whether to go along with a “voluntary” haircut amounting to 53.5%.

Never mind this deadline’s been looming for weeks.

The Financial Times at least wasn’t buying it: “There was little in the way of fresh catalysts on Tuesday that explained the market’s dour demeanour.”

The market does seem to have a sixth sense twitching this morning. Something wicked this way comes. Consider…

  • The G-8 summit this May is being moved from Chicago to the secure perimeter of Camp David in Maryland. Everyone involved is too polite to say so, but we believe they’re frightened of Occupy protesters
  • The bastards may be on the run… but they’re also getting more brazen. Attorney General Eric Holder delivered a speech yesterday justifying the offing of U.S. citizens without trial, merely on the president’s say-so — even calling the practice “legal and constitutional”… seriously
  • Of course, there’s also illogical buildup to war with Iran. To the list of warnings we compiled last month, we add a new one: Yesterday, eight retired generals and intelligence officials took out a full-page ad in The Washington Post saying it was a bad idea.

What happens when the guys in uniforms have to hold back the guys in suits from doing foolish things?


The problem with days like this, if you’re a Federal Reserve governor, that is, is your entire strategy of punishing savers by forcing them to seek capital gains in the stock market gets called into question.

“A healthy economy with good returns,” Fed chairman Ben Bernanke proclaimed before Congress last week, “is the best way to get returns to savers.” Specifically, Mr. Bernanke was asked what a saver should to do when a 10-year Treasury yields less than 2%.

“Clearly,” says Lifetime Income Report’s Jim Nelson, “Bernanke thinks the income reductions savers and conservative retirees have faced on in their savings accounts, bank CDs and U.S. Treasuries are fine.”

“They should be betting on growth stocks anyway.”

“Au contraire. We’d be willing to bet that there are plenty of retirees and near-retirees hoping they don’t have to load up on Apple or Facebook to fund their golden years.”

Addison Wiggin
for The Daily Reckoning