“I call it a bottom. Not just for the stock itself, which happens to be the venerable Bear Stearns, but for the whole stock market, and for the long-suffering housing market, too” - Jim Cramer, March 21, 2008.
Something tells me Jim Cramer is not a Libertarian. Only about 200,000 Americans are actually registered Libertarians. How then can I declare the death of a movement that barely registers on the voter registry? Was it ever alive? Indeed it was. In a 1991 Library of Congress survey of the most influential books on Americans, The Holy Bible came in first. Nobody can credibly claim that Christianity was ever dead, at least not in this country. Number 2 on the list? The Libertarian manifesto: Ayn Rand’s Atlas Shrugged.
While they may not have known it, a huge number of Americans, including much of Wall Street, shared Libertarian ideals. I write that in the past tense. The shift away from Libertarianism involves more than just less free markets, but it is here where it is most glaring. When Wall Street cheers government intrusion into our economy by sparking 5% rallies and sells with even greater force any uncertainty to that intrusion, I see a cloudy future for economic freedom.
Surprisingly, it is not the Wall Street capitalists fighting against government interference. According to Rasmussen Reports, only 24% of Americans support the $700bn bailout and 60% think the government will go too far. Bravo. For Wall Street, supposedly comprised of the best and the brightest, to ignore the economic realities of the past is shameful.
Governments have stymied innovation and capital flow, turned recessions into depressions, created a lost economic decade (the 70s), and also subsidized and unreformed Fannie and Freddie, two of the biggest blemishes on our economy. And we are begging them to get involved again? Reagan once said “Government doesn’t solve problems, it subsidizes them.”
Well, Wall Street is certainly playing for a big fat subsidy to solve its problems. So I’m calling the end of an era; the death of our 25+ year relationship with Libertarianism. But I’m making it retroactive. The deathblow wasn’t AIG, Fannie and Freddie, or the current $700bn bailout plan. I look to March 17th, when our government decided it was necessary to bail out a rounding error of our economy, Bear Stearns. Government interference with Bear Stearns did nothing to aid housing, the financial sector, or our economy but it did do something. It reintroduced “Moral Hazard” back into our lexicon and sounded the buzzer for another tip-off of the serious game of socialism vs capitalism. Except it is not a game. It is our economic future.
Not surprisingly, world markets are generally up today, although not much, following the US lead from yesterday. It looks like the roller coaster ride in the US stock market will continue as futures are indicated sharply lower. No volatility relief in sight with our government driving the economic car. Today is the first day of the new quarter. Redemptions have been on everyone’s mind and by now funds know what they have to do. Be prepared for some crazy individual stock moves over the coming weeks.
Harvard economist Jeffrey Miron wrote an interesting piece on CNNPolitics.com calling for “bankruptcy, not bailout.” Sorry Mr. Libertarian, this bailout is going to happen so let’s get on with it and we can start shorting stocks again. Libertarianism is losing and its opponent has almost all of the points. The refs are controlling the game. When the best team doesn’t win its called socialism.
Try and stay free out there.
Todd Jordan
Managing Director
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