In his morning note, UBS’s NYSE floor legend reminds us of a dark day in history:
On this day in 1963, the President of the United States, John Kennedy, was fatally shot while riding in a motorcade in Dallas, Texas. His assassin (as you may have heard), was Lee Harvey Oswald, who fired from the Texas Schoolbook Depository. But…of course…you know all that! The event has been the subject of several movies, at least three national investigations, countless TV specials, a few hundred books, a million magazine articles and several theories.
Cashin goes on to offer some interesting facts about that day’s events. He uses this history lesson as a segue to current events.
Vulnerability in Washington was a topic on Wall Street yesterday. But it was the nation’s debt and not it’s President that was under attack.
One More Worry Weighs On Market – The U.S. stock market got pounded Monday and the pundits pointed in several directions for the cause. Originally, many of the fingers pointed to the failure of the Super Committee to move the ball. Others scoffed noting that the failure of the Super Committee had been assumed for weeks. As usual with the stock market, the answer was somewhat less clear and direct.
Around 11:30, I sent a note to some trading associates laying out the market influences as I saw them. The list was: 20% Super Committee; 60% European concerns and 20% the comments out of China on a potential global recession. I accidentally omitted the geo-political concerns inspired by the streets of Cairo.
Cashin also points to another new concern regarding the loss of flexibility by our financial regulators in the face of another crisis.
Unintended (And Unwelcome) Consequences – Rich Miller at Bloomberg caught our eye this morning with this rather disturbing note:
Federal Reserve Chairman Ben S. Bernanke and fellow U.S. policy makers may find themselves hampered in restoring financial stability should the European debt crisis spread to America.
The Dodd-Frank legislation passed last year prohibits the Fed from engaging in rescues of individual financial firms, such as it did with Bear Stearns Cos. and American International Group Inc. during the 2008 financial crisis. Lawmakers also banned the Treasury Department from again using an emergency reserve program to backstop money market funds. And the Federal Deposit Insurance Corp. now has to get Congressional approval before it can guarantee senior debt issued by banks.
Investors “don’t realise the extent to which Congress has tied people’s hands,” said Donald Kohn, who served as vice chairman of the Fed from 2006 to 2010 and is now senior economic strategist for Potomac Research Group in Washington. “There is less room to manoeuvre for the authorities.”
Just what we needed – less ammunition as Europe lurches toward a highly contagious banking crisis. “I’m from the government and I’m here to help you.”