Again With the Conundrums
September 6, 2005
When I last wrote, the full scope of the catastrophe in the U.S. Gulf Coast was just beginning to scrape our collective consciousness. I discussed the prospects of seeing a large relief rally versus watching the economy plunge back into recession. Sure enough, the market rallied on Wednesday in classic contrary fashion. In fact, this routine of buyers stepping up when the news seems to get just about as bad as it can get is getting pretty old. If my memory serves me correctly, the buyers usually wait until the market has sold off sharply in response to the negativity. We can only guess how many hedge funds and other institutional players are choosing to skip a few pages in the playbook.
Anyway, last week's relief rally sure was no relief to all the poor folks left stranded to suffer and die in the wake of the Hurricane. In fact, a big difference with this current disaster is that it is very likely to have real economic impact that the market will have to care about. It seems cold to think that the market cares more about the loss of dollars than human life, but such is this capitalist system.
In my last
missive, I also made reference to President Bush's incredibly low approval
ratings, and I imagine those numbers have sunk even more after this historic debacle
in governance. Since you all already
know I have a strong bias against the President, and since you all know that I think
he has consistently done a poor job over the past five years or so, I will not
waste any of your time here diving into my typical anti-Bush rants. Human lives hang in the balance here, and we must
do what we can collectively to prevent any further suffering. The time for recriminations, discipline, and
correction will come soon enough - assuming of course this time the country's
memory will remain fresh and raw, the mind maintains clarity, and the eyes seek
the truth wherever it takes us. And if
that awakening gets us out of
So, last week,
even as oil, gas, and other commodity prices soared, the stock market ran right
along with them. Let us say that is conundrum
number one. At some point, something has
to break this game of chicken. SUVs are
now over 50% of the
So if people
are driving just as much as ever, then BOTH demand and supply
are combining to accelerate the pressure on energy prices. Hurricane Katrina has put a big dent in
My final conundrum is more political than economic. Higher gas prices may benefit domestic refineries, but higher oil prices largely benefit foreign countries. Some of these countries may be allowing (or directing) their windfalls to fall into the coffers of terrorists who in turn become stronger as we become weaker. It is as if we are paying a perverse tax that increases danger all around. This de facto energy tax makes us poorer and less able to fund the defensive (and offensive?) measures we need to secure the homeland against groups who are using those same taxes to strengthen their own capabilities to create man-made destruction. Fareed Zakaria beat me to this conclusion in the August 29th/September 5th edition of Newsweek. I hope enough people read and absorb the deep implications of this self-destructive dynamic and heed the advice of conservation (even our dear President has finally given a nod to conservation as a solution). If we do not regain control of our profligate energy habits, we will endanger ourselves in more ways than we can imagine. If Greenspan has to send us spiraling into recession to help us along, then it just might be worth it. But I cringe at the thought.
In the meantime, please, please be careful out there!