The Axis of Deceit Did Neo-Con Warmongers Hoodwink Their Wall
Jim Grichar (aka Exx-Gman)
neo-con Wall Street group was a term that the late Murray Rothbard
used to describe one of the two elite groups that dictated
and still dictates the policies and major actions of the
U.S. government. Composed of an alliance of neo-conservatives from
think tanks, academia, government, Wall Street elite, and the media,
its philosophy was, and still is, espoused by the Wall Street
Journal editorial page, among others.
marriage of money and a social democrat version of a free market
philosophy (more akin to fascism), these armchair authoritarians
claim to know what is good for us, and, whether or not we like it,
they are going to give it to us. Even if they have to lie
to get their way. (To get a better idea of how Murray really had
their number, read The
Irrepressible Rothbard, a compendium of Murray’s articles
from the Rothbard-Rockwell Report, for brilliant insights into how
this group operates.)
sometimes the best lies of the neo-cons boomerang or fizzle. Based
upon data available from the New York Stock Exchange, one can infer
that some major stock market players expected a repeat of the 1991
war-mania fueled bull market in stocks instead of the generally
punk market that they have experienced. In effect, they have been
served up a half-baked lie-laden soufflé by their DC buddies Dick Cheney, Donald Rumsfeld, Paul Wolfowitz, Richard Perle, William
Kristol, Michael Ledeen, and the rest of this Axis of Deceit.
Which makes you wonder why Wall Street financial types would want
to stay friends with the Axis of Deceit crowd.
Psst!! War is Good for the Stock Market !!
nonsense of war being good for the stock market was being peddled
by the Axis of Deceit from the time George Bush began seeking UN
approval for a war on Iraq last fall. Using the example of the first
Gulf War in 199091, when the market rose from the late fall
of 1990 throughout 1991, neo-con pundits predicted a similar big
runup in stock prices, at least until mid-year. The line
was as follows: 1) we are paying for our military already; 2) moving
them to the Middle East and having them fight will not cost much
more, especially with the U.S. "shock and awe" formula,
which would lead to a quick Iraqi surrender; 3) thus, the war will
not cost much and will not lead to big deficits, higher interest
rates, or rising prices; 4) worries over the war, and possible terrorist
actions here, are hurting consumer expenditures and preventing investors
from buying stocks; 5) once the war starts, and the U.S. is seen
to be winning handily, consumer worries will evaporate and investors
will flock to stocks, driving up prices 15%; and, by extension,
6) the long-awaited economic recovery will take place, providing
a further basis for higher equity prices.
the comparison of today’s economic and market conditions with those
of 12 years ago just does not fit. First of all, the U.S. economy having entered into a recession in July 1990, was about to hit
bottom in March 1991 and begin an upturn. The savings and loan (S&L)
debacle was being worked through, with the clumsy federal bailouts
of shaky S&L’s along with clumsy but actually occurring federal auctions of foreclosed commercial and residential properties.
addition, the communist world was in tatters, giving rise to hopes
that the U.S. defense budget could eventually be cut after we kicked
Iraq out of Kuwait. Resources would be released from wasteful and
unproductive government projects to productive private sector investments
and private consumption. And just as important, George Bush I and
his minions managed to sucker foreign governments into paying for
most of the costs the U.S. incurred in the Gulf War.
wonder that the stock market rose in 1991. Using the newly revised
New York Stock Exchange Composite Index (NYSE-CI, December 31, 2002
= 5000) as a barometer of the stock market, stocks fell from a level
of 1908.45 on December 31, 1990 to 1807.79 on January 9, 1991. Bush
I began the bombing of Iraq on the evening of January 16, 1991,
with the NYSE-CI at 1829.26. This index climbed to 2175.44 on March
5, 1991 (near the end of the war), an increase of nearly 14% from
the preceding December and a rise of 20.3% from the recent low on
January 9, 1991. By the end of 1991, the market had closed at 2426.04,
an increase of 27.1% for the year and, for those fortunate enough
to get in on January 16 before the war started, a rise of 32.6%,
Axis of Deceit tried mightily to con investors and their Wall Street
buddies that the current war was going to spur the stock market
just like it did in 1991. Appearing on television and in the print
and on the Internet, they constantly tried to drive home the point
about how much money investors made after the start of the Gulf
War in 1991.
the credit of many brokers and their Wall Street employers, they
just did not buy this pack of lies, and they were not going to try
to sell these lies to their customers. They knew that the U.S. economy
was in poor shape, with the recession having started in March 2001,
more than two years ago. And they knew that the official arbiter
of recession dates, the National Bureau of Economic Research, has
not yet stated if or when the economy has reached a trough, or bottom.
the recession of 199091, the Federal Reserve has cut interest
rates sharply, hurting savers and bailing out firms that might have
gone bankrupt. This subsidy to borrowers has kept consumption from
falling but has forestalled bankruptcies and delayed the restructuring
and redeployment, where possible, of mal-investments made during
the credit-generated boom of the late 1990's. It has prevented business
profits from increasing and business investment from recovering.
Add the war to this, and you have a recipe for continued recession
or, at best, economic stagnation.
some of the Wall Street financial crowd bought into the hot air
being put out by the Axis of Deceit. And many investors, possibly
hoping to make up for disastrous losses during the last three years,
were also taken in by this line.
any other business that is affected by political decisions made
in Washington, the investment community keeps its ear to the ground
and undoubtedly has sources in the DC area who keep it posted on
major government actions, such as the start of a war, that can have
a major impact on the securities markets, their customers, and their
solvency and profits. The neo-con warmongers nominally outside the
Bush Administration probably played such a role here.
a Bum Tip ?
of stock trading takes place on the basis of rumors and tips, some
good, some bad, and some half-baked like the Axis of Deceit soufflé
served up to Wall Street.
based on rumor or fact, trading on the NYSE flows through its member
firms to the floor of the NYSE, where trades are executed through
specialists, who are required to make the market in specific stocks
and who are subject to specific rules and regulations set forth
by the NYSE. The NYSE publishes data on its member firms’ trading purchases and sales, including short sales two weeks after the
end of a specific week’s trading. Thus, on Friday evening, April
11, after the end of trading, the NYSE will publish the statistics
on its members trading for the week ending March 28. This is presumably
done to protect members especially specialists, who make the market
in specific stocks on the floor of the NYSE from being caught
in a buying or selling squeeze that could bankrupt them.
selling in which someone borrows stock and sells it on the
hope that it will fall in price so that the short seller can repurchase
it, repay the loan of stock, and make a profit is often done
by specialists during times when many buyers suddenly come into
the market. For instance, instead of a $20 stock rising 10 points
to $30 per share because of a massive influx of buy orders, the
specialist, judging that buyers might be in a temporary euphoric
mood, would sell short enough shares at a price of $2425 in
order to meet the high short-term demand. If prices fell later during
the day, he would repurchase the stock and repay the stock to the
firm from which they borrowed it (this latter action is known as
covering a short sale). The reverse can also occur, where a huge
amount of selling goes on, and this is what happened the week before
the war started. In either case, the goal for the specialist is
to make the market and also smooth out price changes.
the case of our current war on Iraq, things were not going too well
before the war started. During the week of March 1014, investors
were very nervous. It looked like the French might be successful
in preventing the U.S. from starting a war on Iraq, at least with
UN backing. A significant number of those investors who purchased
stocks previously, on hopes that they would rise once the war started
and a quick U.S. victory was apparent, may have sold during that
week, thinking that the French had once again delayed a U.S.-led
attack. At the same time, NYSE specialists were net purchasers of
over 575 million shares of stock that week an incredibly
large net purchase (about 50 times normal weekly net purchases,
when they are positive!), much if not all of which was used to cover
previous short sales.
for the specialists to have initially sold so much stock short and
then for them to repurchase that extremely large amount of stock
on a net basis, they had to have been privy to information or strong
rumors that Bush II would start the war shortly after the final
UN Security Council meeting on March 17, and that the "shock
and awe" campaign would in fact yield a quick Iraqi surrender,
said surrender then precipitating a very large stock price
runup. (In fact, Bush went on the air that evening, saying the U.S.
and Britain would essentially go it alone in a war on Iraq.)
during a week that started out with heavy selling and price declines
(March 10, 11, 12), why would specialists not want to wait for further
sharp price declines, thus making more money on their short sales?
Simply put, they did not want to take that risk that the war would
not start. So they covered a large part of their short sales, relying
on the strong rumors, or possible outright tips, from their neo-con
warmonger friends in DC that the war would start the following week
and that a "shock and awe" campaign would yield a quick
movements during that week back up this explanation: from the closing
on Friday, March 7, at 4645.10, the NYSE-CI fell to a closing of
4486.70 by the following Wednesday, March 12. On the next day, probably
in response to heavy short covering purchases by specialists, the
NYSE-CI rose almost 3.1% to 4625.21. On Friday, stocks on the NYSE
rose again, with the Composite Index closing at 4641.63, probably
with lots of further short-covering. For that week as a whole, the
index fell slightly.
the war started on March 20, stocks shot up, closing at 4970.94
on March 21, during the peak of the "shock and awe" attack
that was supposed to bring a very quick surrender. If one had purchased
stock at the recent low point on March 12 and sold on Friday March
21 at the peak of war mania, he would have made about 10.8%, excluding
commissions. While this was not bad, it was much weaker than the
20.3% one could have made in Gulf War I.
those less fortunate souls who swallowed the hook, line, and sinker
along with the Axis of Deceit bait, their returns are mediocre at
best, and lousy at worst! If they bought stocks on December 31,
2002, the NYSE-CI fell from 5000 to 4870.57 on April 9, the end
of the third week of the war and a day on which the U.S. armed forces
took control of Baghdad, for a loss of 2.6% excluding commissions.
If they had been astute, buying on March 12 and selling on
April 9, they would have made 8.6% before commissions.
for those hoping that stock returns will somehow improve if they
hold on a bit longer, well, lots of luck! Investors are once again
turning their attention to the sad state of the economy and corporate
earnings and are turning attention away from the Iraqi war. And
if the postwar Iraqi occupation lasts longer and costs more than
expected $75 billion, or the Axis of Deceit gets Bush II to attack
Syria or Iran, or al Qaeda launches successful retaliatory strikes
on U.S. soil, investors will face some really tough times.
bottom line is that the Wall Street financial crowd ought to learn
that the Axis of Deceit has their own agenda, and it’s not helping
Wall Street types make money!!!!! War hurts the economy and cannot
help it. It destroys precious human life, destroys valuable property,
and expends resources to do this. The sooner the Wall Street crowd
terminates their alliance with the Axis of Deceit, the more likely
they and their clients are to make a profit on their investments
and to live in peace to enjoy those profits.
Grichar (aka Exx-Gman) [send
him mail], formerly an economist with the federal government,
writes to "un-spin" the federal government's attempt to con the
© 2003 LewRockwell.com