DC wants Dow to drop 1,000: Bove
Published: Monday, 14 Oct 2013 | CNBC
Financial analyst Dick Bove thinks gridlocked politicians are asking for a market sell-off.
“What do they think will convince the American public that they as our leaders must act? It is becoming very clear that what they want is panic in the equity markets. They want to see the Dow drop 1,000 points,” Bove wrote in a note to Rafferty Capital Markets clients Monday.
“An event of this nature would be blasted around the world by the media and it would constitute a threat that all Americans could understand. Once the public’s attention was obtained and focused, Congress and the President would act to resolve the current issues.”
Bove urged investor caution.
“The message to shareholders is ‘Watch Out!’ Buying shares at the present bravely arguing that this crisis will pass without harm to anyone is not a good strategy,” he said. “The only good strategy at the moment is to get out of the way. The politicians will get the panic they seek.”
Bove’s comments echo those made to CNBC recently following President Barack Obama’s interview with John Harwood.
“They feel that a severe market sell-off would be helpful to break the logjam,” said Greg Valliere, chief political strategist at Potomac Research Group in Washington. “It would be helpful in making the Republicans sue for peace. Obama and [Senate minority leader] Harry Reid believe that.”
A little market crisis—not enough to crash the economy into recession but enough to stir public fear that would push Republicans to the negotiating table—could be just what settles the impasse in Washington and reopens the government, according to investing pros and market observers.
In an exclusive interview with CNBC, the president warned Wall Street that this shutdown could be different. Previous halts in nonessential government activities have caused little market reaction, with major averages actually rising most of the time in the month after the shutdowns are settled.
The politics of fear.