Re: Political Factor in Possible Market Decline
In today's posts on the long bond, Iqbal has correctly noted that some supportive economic news and a benign FOMC stance have failed to lift the bond. Some have posited that a resurgence of union militancy may be a factor. Perhaps, but let's look at another consideration.
Treasury paper is, among other things, a proxy on the extraordinary political stability of the United States. Two stories that broke in the past twenty-four hours provide evidence that this stability may be threatened. The Chung interview with Tom Brokaw contained allegations that the First Lady and then-Energy Secretary O'Leary encouraged or accepted political and charitable contributions in return for access to the Oval Office. There is now a concession from Vice President Gore's staff that the V.P., contrary to previous statements, made phone calls at government expense for the purpose of soliciting political contributions. Both these actions may be felonies under the U.S. Code.
It is not my intention to comment on the veracity of these claims or make any other political statement. However, as we move into a historically weak season for financial instruments, we do well to be aware of the instability these allegations could create. These stories may truly be "full of sound and fury, signifying nothing," but, at least, they fill the information vacuum surrounding the recent weakness on bonds.
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