A dialogue from a movie about 40 years ago, “Being There” (1979; Hal Ashby, director):
*US President “Bobby”: “Mr. Gardner…do you think that we can stimulate growth through temporary incentives?”
*Chance the Gardener [a well-meaning yet rather simple-minded and uneducated fellow who nevertheless gains a respected position in elevated Washington circles]: “As long as the roots are not severed, all is well. And all will be well in the garden…In the garden, growth has its seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.”
*Benjamin Rand: “I think what our insightful young friend is saying is that we welcome the inevitable seasons of nature, but we’re upset by the seasons of our economy.”
Over a decade ago in late winter, the beloved former Federal Reserve Chairman Ben Bernanke earnestly proclaimed, following various monetary easing measures and shortly after what turned out to be a major stock marketplace bottom (S+P 500 low on 3/6/09 at 667): “And I think as those green shoots begin to appear in different markets and as some confidence begins to come back that will begin the positive dynamic that brings our economy back….I do see green shoots.” (60 Minutes, CBS, 3/15/09).
Everyone knows that the American and international economy thereafter recovered from the eviscerating global financial disaster of 2007-09. Stock investors and their allies (including central banks) admired, applauded, and promoted the S+P 500’s heavenly ascent from its March 2009 depth to its February 2020 peak (2/19/20 at 3394), an era during which its price soared over five times its March 2009 elevation.
Economic domains, including Wall Street financial fields, are cultural phenomena, not Natural ones. However, the Fed Chairman’s inspiring springtime-related “green shoots” metaphor implies a seasonal opposite. It suggests that the United States and other nations can reveal signs of an oncoming autumn (and even an impending winter) in their economic (financial, commercial, business) territories. In any case, central bankers and politicians have not abolished slowdowns (or recessions) or bear moves in American stock marketplaces.
Not long before the S+P 500’s majestic 3394 high on 2/19/20, the essay “Critical Conditions and Economic Turning Points” (2/5/20) concluded: “In any event, the coronavirus is not the only phenomenon warning of (helping to create) eventual significant American stock marketplace price feebleness. Prior to the coronavirus’s dramatic move into the spotlight, several bearish signs for US stocks (in addition to the widespread complacency regarding the risk of a downtrend) existed.” “Critical Conditions and Economic Turning Points” summarized and analyzed an extensive list of these danger signals. Please refer to it for details.
“Critical Conditions” underlined: “With the passage of time following 2007-09’s global economic disaster, memories regarding the accompanying bloody bear trend in America’s stock marketplace benchmarks such as the S+P 500 gradually yet significantly faded. As the S+P 500 ascended, and especially as it advanced to and sustained record highs, widespread sermons declared that we should “buy the dip”. This aligned with the venerable proverb regarding the reasonableness of buying and holding United States stocks for the “long run”.”
“Of course since the S+P 500’s major bottom on 3/6/09 at 667, a few bloody stock price slides in that signpost (and “related” global equity yardsticks) terrified stock “investors” and their allies, including central banks such as the Federal Reserve, American politicians, and the financial media. Yet as the S+P 500 achieved a record height quite recently with 1/22/20’s 3338 (2/5/20’s level matched this), such advice definitely looked excellent to many stock owners and observers!”
“Besides, as they have numerous times over the past eleven years, won’t beloved central bank physicians such as the Federal Reserve Board (under the guise of fulfilling their mandate), European Central Bank, the Bank of England, China’s central bank, and the Bank of Japan rescue stocks and generate rallies in them? Not only soothing rhetoric, but also yield repression and quantitative easing (money printing) remain antidotes for stock price drops, right? And politicians might assist via new tax cuts, boosts in infrastructure spending, or similar schemes.”
“Thus the majority of US stock marketplace players have focused more on the rewards of owning than the dangers of doing so. Substantial complacency reigns regarding the potential for noteworthy American and other stock marketplace price declines.”
“Government actions to prevent the spread of the virus will tend to hamper economic growth. Fearful consumers and nervous corporations may slow their spending. The wider the reach and the longer the persistence of the ailment, the greater the economic damage. And economic (financial) weapons such as money printing and yield repression available to the Fed and its friends obviously do not halt epidemics or cure diseases (or fears of them).”
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Global Economic Troubles and Marketplace Turns- Being There (3-2-20)