By Todd Harrison
NEW YORK (MarketWatch) -- Big Ben chimed on the economy last week; he spoke a lot but said little we didn't already know.
Federal Reserve Chairman Ben Bernanke pledged that the Fed stood ready "to provide more accommodation if needed" but professed "central bankers alone cannot solve economic problems."
He admitted the economic recovery "remains far from complete," "growth has been less vigorous than expected" and labor markets are waffling through a "painfully slow recovery."
He shared that households are "more cautious about the outlook than he expected" in a nod to the shifting social mood and abating risk appetites we've monitored the last few years.
These aren't new issues; they're the result of cumulative imbalances that have been steadily building under a seemingly calm surface. Minyanville highlighted many of these dynamics long before they were considered news; in fact, most of them seemed far-fetched when we first posited the premises.
We noted the distinction between medicine that cures the disease (debt destruction) and drugs that mask the symptoms (stimuli) when the semantics seemed inconsequential. Morgan Stanley /quotes/comstock/13*!ms/quotes/nls/ms (MS 25.97, +0.30, +1.17%) echoed that angst last week when they opined that government defaults are all but inevitable. Read Minyanville's "The Eye of the Financial Storm."
We flagged Fannie Mae /quotes/comstock/11k!fnma (FNMA 0.30, 0.00, 0.00%) and Freddie Mac /quotes/comstock/11k!fmcc (FMCC 0.34, 0.00, 0.00%) as toxic enablers as far back as 2003 when their stocks were trading around $70 each. Today, their combined price levels are a shade below 70 cents.
We foresaw a "prolonged period of socioeconomic malaise entirely more depressing than a recession" in 2006 and suggested financial institutions were technically insolvent in 2007 as the Dow Jones Industrial Average (DJIA) and bank stocks (BKX) were at all-time highs; that didn't win us many friends on Wall Street. Read Minyanville's "The Upside of Anger."
There are more examples but I'll stop here; my intention isn't to garner a pat on the back or a victory lap, it's to demonstrate the forward-looking lens with which we operate.
Captain Obvious
I've taken this walk down memory lane for a reason; over the last few weeks, an interesting evolution has unfolded as it pertains to the psychology surrounding the marketplace and the point of recognition regarding our economic condition.
CNBC aired "DEPRESSION" segments, telling the world just how bad it is -- and how dire it will become.
"Buy me a drink, sing me a song; take me as I come 'cause I can't stay long."
Tom Petty
The New York Times ran front-page stories about wary investors fleeing the stock market, the end of the homeowner nest egg and the baffling stock swings that remain ominously unexplained.
Savvy seers, including one of the all-time greats in Stan Druckenmiller, have "gone dark," due in equal parts to frustration with the markets and a desire to focus on self-fulfilling, philanthropic endeavors. Read Minyanville's "Seeking Solutions in an Uncertain World."
Don't Be Cruel, September
September is often a terrible month for stocks, but it doesn't have to be, says stock trader Chris Kacher, co-author of a new book on market strategies that investors can use to find stocks with strong relative strength and leadership qualities.
More Todd Harrison
| Aug. 18, 2010 | Why savvy seers are 'going dark' | |
| Aug. 4, 2010 | Now, the main event: inflation vs. deflation | |
| July 28, 2010 | What I've learned from the market bubbles | |
| July 21, 2010 | Is the Federal Reserve a toothless tiger? | |
| July 14, 2010 | China postures for the New World Order |
Chuck Jaffe
On Mutual Funds