Breaking the Shackles of the 9 to 5 | by The Time & Money Group

The stock market has been on the brink of breaking three times this year alone and four if you go back to August of last year. Each time the good ole gumint stepped in to save the day. In January, on Martin Luther King Day, with the US markets closed the world markets were in free fall. I remember not sleeping much that night - thinking about how much money would evaporate from my brokerage account when the market opened.

Fed Chairman Ben Bernanke and his buddies didn’t sleep much either. One hour before the market opened, Bernanke announced an emergency 0.75% interest rate cut (Fed Slashes Key Rate). Since, the Fed normally moves in quarter point, at most half point, increments - the magnitude of the cut stopped the markets in its tracks. The market would regain its footing and grind higher over the next 6 weeks.

All would be fine for investors until the stock of Bear Stearns, a major Wall Street player, started making a beeline for zero. The company’s CEO tried to assure the market that the company was sound and had plenty of liquidity, but in a matter of days it was a foregone conclusion that Bear Stearns was toast (The Last Days of Bear Stearns).

Unfortunately, Bear Stearns business dealing were so inter-related with so many other financial firms that its demise would have had a domino effect. Once again the Fed went to work over the weekend. Before the world markets opened, it would announce a bail-out plan that would halt a potential disaster. Two months of happy days and higher stock prices would follow.

It is weird how many things happen in threes. Bernanke and the boys would pull yet another rabbit out of their hat this past weekend. This time two much larger and more interrelated financial institutions - Fannie Mae and Freddie Mac were the beneficiaries of their kindness (US Spells Out Fannie-Freddie backstop plan). Yes, Bernanke’s call to action was prompted by Fannie and Freddie stock’s death wish.

Interestingly the market wasn’t very impressed with Uncle Ben’s plan on Monday. By Tuesday, they ginned up plan B with the Security Exchange Commission (SEC). The SEC would put a protective shield around 19 financial institutions (SEC Spares Market Makers From `Naked-Short’ Sales Ban). Three days and 500 Dow points later – Benny and the gumint were heroes again.

So what are the ramifications of all of this government intervention? We have an election coming up and we can’t have angry voters in the booths. So, my guess is that over the next few months we are going to party like it is 1999. After November, let’s just say it should be interesting.

PS,

Have you noticed how Uncle Ben’s shovels are getting bigger and bigger with each crisis? I know that he is a student of the Great Depression, but I wonder if he has studied the first rule of holes.