We’re Partying Like it’s June 29.
June 29 holds a special place in our
- On June 29 the S&P; 500 (SPX) opened at 1245.94, the low of the day, and went out a penny shy of the high at 1272.87.
- Yesterday, the SPX opened at 1236.74, the low of the day, and went out just shy of the high at 1259.81.
- After June 29s close of 1272.87, 10 days later the SPX closed at 1236.20.
- What happened? Geopolitics? Oil? Dollar? Inflation? Stagflation? Deflation? Pick whichever one you like.
- The issue remains the same as it has been since late 2002: liquidity and risk appetite. Alan Greenspan ultimately was able to “successfully resolve” every economic issue he faced by injecting liquidity.
- Asian Contagion? Liquidity Injection. Long-term Capital Management? Liquidity injection. September 11? Liquidity injection. Iraq War? Liquidity injection.
- Of course, what gets lost in this “success,” the reason he was able to “successfully” do this, was because risk appetites (time preferences) were amenable to increased liquidity and risk-seeking.
- The battle now is between risk appetites. Central banks cannot force risk-seeking behavior, they can only feed it when it exists.
- The reason we are dealing with stagflation now, as Bernanke admitted yesterday behind a thin veil in his Home Free-Hocking testimony, is because stagflation in this case is simply the transition from risk-seeking (inflation) behavior to risk aversion (deflation) behavior and decreased time preferences.
Thanks to Kevin Depew for today’s thought of the day
Mike Shedlock / Mish