This quote, and Joe Biden officially welcoming “organized labor back to the White House” sealed the deal this week for the US stock market to have its worst January ever (down -8.6% vs. January of 1970 which was next worse at -7.7%).
Pictures are often more powerful than prose. The Reuters picture in Joe Nocerra’s NY Times article (below) captures a look on Timmy Geithner’s face that I found to be a metaphor for a lot of things, not the least of which is a New York banker who should be grateful to now be receiving a stable government paycheck. The good ole boy days of the self perpetuating bullish narrative fallacy are gone.
This altogether scares Wall Street, and it should. Unionization (Biden) is no different that Re-Regulation (Obama) in that no matter what your politics are, they have the factual impact of depressing the corporate profit margins of some of the fat cats in America’s corporate Board Room.
Make no mistake, there are plenty of corporate execs who completely missed proactively preparing for this downturn – this isn’t just a Wall Street thing. They paid themselves large to overbuild capacity at a global economic top (Coach, Target, Caterpillar, etc…), and they’ll keep paying themselves as they fire people at the bottom.
While the pricing in of this corporate incompetence isn’t new (the Dow has only 400 points left of downside if the 4 US financials in the Dow actually went to zero), it is surely a reminder that The New Reality that we have been belaboring for a long time now, is here.