‘You never want a serious crisis to go to waste.”
It was almost exactly five years ago that President Obama’s incoming chief of staff, Rahm Emanuel, made that memorable remark to a group of CEOs during the height of the 2008 financial crisis.
As 2013 winds down, the Rule of Rahm still resonates. In fact, the Great Punt of the debt debacle into 2014 paves the way for a better end to the year than was in the cards just a few weeks ago.
At the Fed, Ben Bernanke, Janet Yellen and company can use the shutdown as an excuse to keep pouring on the easy money.
CEOs with bad numbers, can cite the shutdown as the cause of their shortfalls.
Everyone from the president to Wall Street economists can downplay each and every government statistic from now until the ball drops in Times Square as inadequate, due to the October pause in number-crunching.
In that vacuum, the good news that has been percolating all year long and has been mainly reflected in the double-digit rise in stock prices can shine through.
Here are some reasons: First, unlike the semi-resolution of the first debt debacle in early August 2012, this one comes at a seasonally strong time for stocks. According to the Stock Trader’s Almanac, November and December have been the best months to be invested in the market over the past 60 years — with 1.5 percent and 1.7 percent returns, respectively, on average.
The fact that stock prices remained relatively steady during the shutdown shenanigans in the normally volatile month of October attests to the overall strength of the 2013 rally.
But most important, Congress and the president, through their childish behavior and incompetence, have given the Federal Reserve incredible cover.
In the wake of the shutdown, any talk of Bernanke and company slowing down easy-money bond purchases is off the table, with most economists now saying it won’t happen until the summer of next year at the earliest.
While S&P estimates that the government shutdown may have shaved 0.6 percent off gross domestic product growth for the fourth quarter, that amounts to only about $25 billion in GDP output — about the same amount that Bernanke hinted he might have shaved per month from his money-printing bond purchases.
The economy will wind up awash in far more money as the result of the two-week shutdown than had it never happened.
Perhaps that’s what the stock market has been trying to signal all year long with its relentless rally.
I, for one, would rather listen to Mr. Market than Messrs. Obama, Reid or Boehner.