WHEN DOES ONE START TO WORRY?

The Fed released the minutes of its January meeting today which was not warmly received by the stock market boys.  If there has been a clearer indication that the remarkable performance of the indices up to this point has to a great extent been the result of easy money, what happened to today should prove that if there was one don't expect another.  Indications that the current round of pump-priming by the Fed may not end when unemployment falls below 5% but might well end much sooner, drove the DOW down by over a 100 points at the close, despite the fact that the hints in the minutes were relative mild.  Nevertheless, coming so soon after the definitive statement to the contrary made by Bernanke himself in just the last quarter it rattled investors nerves.

Despite what certain politicians and talking heads keep yelling us, the latest signs have not been good.  Unemployment is relatively unchanged.  Housing starts announced today were way down.  We are looking at the sequester which appears will occur and which has done far more to reduce confidence than the fact indicate and to which economists have applied ridiculous figures of economic harm.  Europe is not looking good at all including Germany which is the bell-weather and even Asia is showing severe signs of slowing.  All in all, not a good economic picture worldwide.

Unfortunately, The Leader  and his team are doing nothing to help things.  The sequester, of which we spoke yesterday, has been turned into a doomsday scenario from a major irritant by Obama's intentions.  [Correction:  the amount involved spoken of in yesterday's offering as being $60 billion should have actually been, "in excess of $ 80 billion".....I regret the mistake].  The Leader has made it clear that the cuts he will make are those that will have the greatest effect on public opinion and be the most visible.  In short, they will be politically motivated.  Unfortunately, that will impact consumer confidence the most which means his entire strategy must be to blame all of this on the opposing party.  This is not the way to run a railroad and even if successful could result in a true pull back in economic activity which could put the U.S. in recession as early as the second quarter.  If that occurs...well, there will be plenty to think about in regard to future actions.

Over There, Massimo called today just to confirm that he had been correct and the Berlusconi had picked up a good deal of support and it was not too soon to start think about what kind of coalition it would be that governs Italy for what he believes will be a "brief time."  That says he, will be the worst of all worlds as that will cause the rest of the Euros to believe that Italy is ungovernable.  I'm afraid he's correct which I'm afraid will cause a serious upheaval in the money markets causing a lot of the gains in bond yields and especially in confidence to be lost.  The Pope's last day is the 28th; Italian elections are the 28th; the last day without a sequester is the 28th.  What me worry?  Nah, not until the 27th. at least.