As you have probably noticed, almost everything on the financial markets has been "on hold" since the end of August and the end of the Republican Party's convention. As this is being written on Saturday, September 18, (September 17 in North America), there are 31 trading days to go on US and world markets before November 2 and the US elections.
Senator Kerry was recently quoted as accusing President Bush as: "Living in a fantasy world of spin." We would have to agree, but we make the proviso that President Bush - cocooned as he clearly is from the slings and arrows of the "normal" world - lives in the same world as all the rest of us do. In the world, "spin" is no fantasy, it is becoming almost all encompassing.
Imagine for a moment a truly "disinterested" observer, a Rip Van Winkle, if you will - waking up from a one-hundred year slumber to confront the world in general and the US in particular of September 2004. Imagine further that Rip was given a "transitional period" before being let loose into this world which he had never seen, and used this period to absorb the actual FACTS regarding the global economic, financial, political, and geo-strategic situation.
Having absorbed these facts, and metaphorically stuffing his eyeballs back into their sockets on several occasions, Rip is turned loose into the world. He looks, he listens, he reads the news, he engages in conversations with those around him. He quickly finds himself astonished, nay dumbfounded. He cannot decide which is more amazing, the things people choose to discuss, the way these discussions/debates are conducted, or the conclusions reached. He cannot for the life of him find a FACT anywhere in the process.
He hears the President of the United States proclaim that "Freedom is on the march - in Iraq!". He hears the statement greeted with huge cheers. He has the facts. He knows about the daily car bombs. He knows about the "green zones". He knows about Mr Bush's favorite title - that of a "War President". He can find no connection anywhere between the facts and the assertions. He wonders if he's missed something.
He hears the head of the Federal Reserve talking about the prospects for the economy. He sees these statements received with a strange combination of uneasy incomprehension and complacency. He concludes that nobody understands a word of it, which does not surprise him since he hasn't heard a word of sense in any of it. He wonders, though, about the complacency.
Wherever he goes, he finds the same thing. Debate about effects are rampant, with the "validity" of the position being judged on the volume with which it is asserted and/or the incomprehensibility of the argument. Nowhere does he hear any debate about causes. He hears debate about terrorists - he hears nothing about imperialism. He hears debate about rising prices - he hears nothing about the nature of money. He hears discussions about wealth - he hears nothing about savings or production.
What is "normal" to us is flabbergasting to him. Unlike us, he has not lived through the intervening stages. He has been dropped into the middle of it. What to us is "spin" is to him a virulent case of large numbers of people taking leave of their rational faculties and even their senses. But being a man who knows history, he knows what he is seeing around him is by no means unique in history. He comes to the gloomy realisation that here is one more episode of the famous adage that: "Those who do not remember the past are doomed to repeat it."
He wonders only how bad this one will be, in comparison to the historical episodes he has studied.
He is not alone in that. Anyone who does not divorce effect from cause and who uses facts as the building blocks with which to reach rational conclusions shares his conjecture, and his concern. Evidence of this abounds, notably in all the fine work being done all over the internet to connect causes to consequences and facts to analysis.
Here in Australia, as in the US, an election campaign is in full swing. Though not quite as blatant as they are in the US, the methods used by the contending parties are the same. Aviod any discussion or debate about principles. Make sure there are no fundamental (and few incidental) differences in the "platforms" of the major contending parties. Never answer any question on a topic which you do not want to see become an "issue" - stonewall, ridicule the questioner, or abruptly change the subject. Encourage conformity in thought and deed. Damn your opponent with faint praise if absolutely necessary, otherwise demean and villify him or her at every opportunity.
The worse the REAL situtation becomes, the faster the "spin" revolves and the more outrageous the claims (and counter claims) become. That process is especially obvious during an election, but it is a constant, especially in financial analysis, whenever cause has been divorced from effect and truth finds no place in exposition.
In general, the reaction to this tends to be a determined effort to block out what is going on around oneself. There are legions of people, both here in Oz and in the US, who will tell you they will be delighted if they never see another campaign ad or read about another campaign speech. The same is true when it comes to financial markets. Like we said, the markets have been "on hold" since Labor Day. Clearly, if they can't generate the attitude necessary to make them go up, the "powers that be" will settle for them remaining static until the people have voted and things get back to "normal".
With a couple of short-lived deviations outside the "zone", Gold has been trading in a $US 10 range between $US 400 and $US 410 for over a month. There is absolutely no doubt that it will stay in this range if the financial "powers that be" can possibly keep it there. The attitude is that if they can't be scared out of Gold, we'll bore them to death. We'll see if "they" can do it. If they can - you and I have a 31-day window of opportunity - to get our "balance sheets" as close to the "black" as we possibly can and to maybe pick up a bit more of the yellow stuff while it's still going "cheap".