Dick Bove: DC Wants the Dow to Fall 1000 Points

Watching CNBC. Bove says that because the stock market isn’t in a major sell-off the pols can’t get away with the kind of bad deal (my interpretation) that they want. He warns investors: “The only good strategy at the moment is to get out of the way. The politicians will get the panic they seek.”

CNBC spins this as: lawmakers need a reason to act to avoid gridlock. What Bove is actually saying is that there is a conflict of interest between the pols, particularly the Democrats, who want to bust the sequester and force the full implementation of Obamacare as scheduled, and American taxpayers. This is why Obama says, “this time I think Wall Street should be concerned”. Nice stock market you’ve got here, pity if something were to happen to it.

It appears that Obama is trying to do with the markets the same thing that he did with the national parks: make the government shutdown costly for ordinary Americans, whom he hopes will then find new cause to support him. The media will keep trying to reframe this crass partisan shakedown as Obama working to prevent disaster, but what he’s really doing is transparent to anyone who pays attention.

9 thoughts on “Dick Bove: DC Wants the Dow to Fall 1000 Points”

  1. Completely transparent. He will not be blackmailed by the GOP. He does not have to stand for reelection and I think Dirty Harry’s “Make my day”, well describes his attitude.

  2. The DJIA is a pimple on the back of the S&P 500. The S&P 500 is a pimple on the back of the bond markets. If the DJIA wavers between 3,000 points, it’s line noise. If bond market yields rise significantly, then you have TPTB’s attention.

  3. A big drop in the stock mkt gets the attention of voters. Conversely, the bond mkt needs to remain strong so that financing costs don’t pop and set off a crisis that impedes further borrowing and spending. So the Fed buys bonds for long-term political stability while Obama tries to unsettle stock investors for short-term political gain.

  4. I will agree with the motivations with one addition. It is bipartisan. The Institutional Republicans are desperate to capitulate, and actually have done so several times. Their problem is that the Democrats seem to be over-reaching and demanding not only a clean CR and a raise in the debt ceiling until AFTER November 2014; but also increased spending overall and ending the sequester, at least on the non-military side.

    The Institutionals know that they cannot survive that blatant a surrender. And even if they did survive for a while, the coming capitulation on amnesty and open borders would be assuredly fatal after doing so.

    A stock market collapse could, in theory, give them cover for anything AND would have the advantage of giving them a club to beat on their Conservative base, which they hate far more than any Democrat. With the help of the media, they may think that they can pull both of them off.

    Their problem may be that they are about to find out that their Democrat “friends across the aisle” are willing to wipe them out as no longer being useful, and go for total victory.

    Subotai Bahadur

  5. What if they shut down the government and nobody noticed? (see Glenn Reynolds column: http://www.usatoday.com/story/opinion/2013/10/15/government-shutdown-washington-column/2976849/)

    The market is soooo much bigger than Washington DC. World commodity prices will rise and fall with supply and demand. The DOW is now at 15134. A 1000 point drop would be about a 6.6% drop in one day, leaving 93.3% of the market value in place. Eye opening, and out of normal parameters but not the end of the world. The market deteriorated more than 90% during the late 1920’s and did not recover until 1954 (from Wikipedia). Somehow it just doesn’t seem like the Teleprompter has that much clout.

    Big money and Wall Street saw Obama as a pawn to be manipulated, and mostly supported his election. A big drop in the value of their portfolios would shut off the money flow to Democrat causes. Probably not in the cards.

    Has anyone asked the question of why all that money (300 million plus) went to a Canadian company to do the IT infrastructure for Obamacare? How did a Canadian company contribute enough (without breaking election laws) to the Democrat processes to warrant a payback of this magnitude? Seems odd to me.


  6. Scott: “How did a Canadian company contribute enough (without breaking election laws) to the Democrat processes to warrant a payback of this magnitude?”

    Drop the parenthetical. If it’s for Hussein it is legal.

    More to the point this how they sold TARP. Look how well that turned out.

    Subotai: You are on the right page. This is what John Kass calls the Combine.

    I don’t think anything much is going to happen. The Fed could knock over the bicycle by withdrawing QE, but even though it might make Hussein’s point, it has the possibility of really disrupting things in a way that could quickly get out of control, so they won’t.

    Besides Yellin is the tell. She will man the monetary pumps 24/7.

  7. “Besides Yellin is the tell. She will man the monetary pumps 24/7”

    $400 billion the past few months, $55 billion last week, $20 billion this week
    (numbers courtesy of wallstreetexaminer.com – good site for econometrics if you can put up with their occasionally veering off to far side of the political moon)

    Yellen was Clinton’s girl and didn’t appear to be Obama’s first choice. It’s hard to see how coordinated she might be, if at all, with the insular White House brain trust.

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