The Bear is dead! Long live the… what?
A brief word on supernatural interventions, unnatural markets and preternatural opportunities

by Adam Lass

The phrase that is rising up from the hubbub of the chattering classes this month is “intervention.” I’m hearing it all over the place: should we abandon the pursuit of al Qaeda terrorist cells and intervene in Iraq? Should the U.S. central bank continue to intervene in our rocky economy? Did the Bush White House already intervene in the stock market?

As usual, most of the questioners don’t truly understand the questions, let alone the answers. Be that as it may, their perceptions and desires do affect the gestalt, so let’s examine them briefly:

Have no doubt, moving on Iraq will mean the end of any effective pursuit of al Qaeda. Not only will it destroy any sort of international coalition, it would mean allying ourselves with those who are operating against Saddam in Northern Iraq, a mostly disorganized bunch who appear to be allied with Islamic revolutionary forces in Turkey, Iran and… al Qaeda.

I suppose the alternative of waiting for one of Saddam’s equally bloody-minded clansmen or maybe some Iranian cleric to bump him off is just too frustratingly passive for a guy with a decades-old, Texas-style family grudge to settle.

The visible hand

On the home front, less-than-divine intervention is thoroughly permeating the Volksgeist: should the powers that be intervene in the ongoing market crash (in the form of even further Fed rate reductions)? Or have they already (in the form of collusive massive futures buys at key foundering moments)? And is either a good thing?

My recent reading has yielded two views on such acts of manus hominis. The first is a tale I’ve come across twice lately, once in “Theodore Rex,” Edmund Wilson’s recounting of Teddy Roosevelt’s presidency, and again in Ron Chernow’s “The House of Morgan.” Both books (albeit from two very different points of view) relate how, in 1907, J. P. Morgan (both the man and his bank) pretty much single-handedly saved Wall Street from its own excesses.

Morgan’s rewards for his Herculean efforts were pecuniary only: despite the fact that his intervention was at Roosevelt’s behest, he was thoroughly excoriated afterwards by both the press and the White House for being the only party powerful enough to pull the trick off. Indeed, the federal government spent the next few decades doing its best to transfer that power from Wall Street to Washington. The reward for this endeavor: the greatest depression in American history, just a few short years later.

The worst intentions…

And that’s by far the more optimistic tale. The third book on my nightstand is “Koba the Dread,” Martin Amis’s meditation on one of the greatest centralizations of power of the 20th century. As slim as this volume is, it is taking just as long to read as Chernow’s Brobdignagian tome, as I must put it down periodically due to alternating bouts of mind-numbing astonishment and out-and-out nausea. I can’t bring myself to relate specific incidents, but a brief perusal will convince even the densest reader of the inherently suicidal nature of state-sponsored “interventionism.”

But enough polemics. The question of whether interventions do any good can be answered far more simply by a glance at the Dow’s chart. Take a gander at the results of the 10/02 intervention that followed the infamous attacks and the crash that supposedly followed (a concept that I believe I have thoroughly disproved over the past six months). If ever there were a good argument for an orchestrated effort to stem the bleeding in a hemorrhaging market, it would seem to have applied at that particular moment.

And yet, as seemingly heroic as this act was, in truth, all it did was prolong the pain and invite investors to dump yet another wad of cash down Wall Street’s ravenous maw. Note instead the upward arc and final return as the market seeks the genuine bottom required by the refutation of the Internet bubble. My conclusion on divine intervention: it didn’t work in for Roosevelt in 1909, it didn’t work for Bush in 2001, and it probably won’t work in 2002. (It did, however, work in hideously negative perfection for Stalin.)

Profits beyond nature

Instead, look for the narrowing pennant structure formed from July, August and September’s extremes to tighten down to a point just below 8,550 and then a collapse to my probable low target of 7,399. I spoke in the title of a “preternatural opportunity,” a chance to cash in “beyond the normal course of nature.” I can’t think of a better way to describe the potential profit to be had by betting against Washington and Wall Street’s attempts to circumvent the natural effects of the market.