Last week I happened to take out a great old gangster movie from the library, White Heat starring James Cagney. I was also closely tracking doings on Wall Street. Some similarities between that film and Street doings were quite striking.
Cagney played a sociopath named Cody Jarrett. Among his other foibles, Jarrett had a deeply neurotic dependency on his mother. Whenever he was having one of his debilitating migraines, it was only by sitting on her lap and having his head stroked that the pain could be relived.
How could I not see an analogy here with Wall Street and Ben Benanke? Whenever The Street so baldly overplays its hand that some form of retribution seems imminent, it does the equivalent of sitting on Ben’s lap and having the Fed stroke the pain away with historically low interest rates and oceans of newly printed cash.
It was the climactic scene in White Heat, however, and what happened on the stock market this past week, that really sealed the deal for me, That made the present-day stock market’s story seem like a financial clone of that movie.
Jarett has escaped prison in this climax. Is trapped near an oil refinery. Climbs skyward on one of its long ladders. Cries out: “Look, Ma. I’m on top of the world.” And though his body is being riddled with bullets, he keeps climbing, leading one astonished watcher to ask: “What’s holding that guy up?”
Now think of what happened on Wall Street last week. The financial news “bullets” it was being riddled with were heavy caliber and came in a stream.
A leading indicator measure of future economic growth dropped for the first time in a year, Industrial production was down last month. New home construction plunged. CPI inflation was clearly rising, causing several central banks (though not ours) to raise interest rates. The EU was in deep and pervasive trouble because some of its poorest members need larger and larger bailouts. Record flooding of the Mississippi was slowing vital river traffic, destroying crops, threatening oil facilities. There were a couple of sovereign debt downgrades. Profits were disappointing at leading retailers. Bellwethers like H-P and Home Depot took hard hits. And amazingly, even analyst expectations, which rarely are not exceeded because they are so carefully lowered so as to be exceeded, were not last week exceeded on a surprisingly large number of stocks.
All that rotten news. And until the last two hours on Friday, the Dow was still actually headed for a positive week. Because what was still “holding this guy up” was the announcement that the Fed had no near-term plans to increase its own interest rates, nor to hasten cut backs on its stimulus money printing sooner than expected. So, the Dow, too, could shout the equivalent of: “Look, Ben, I’m still on top of the world, though the rest of the economy is falling on its face.”
On Monday morning I’ll be returning White Heat to my local library. But alas, when sanity again prevails in the stock market, and reflects what’s happening in the real world, like Cagney-cum-Jarrett, it’s gonna take a mighty fall.
More from this writer at http://blog.wallstreetpoet.com