The JFK Years and The Stock Market
1960-1963
A Democratic President seems likely given Bush's unpopular war and the massive
deficits and public
resentments it has created. We might want to consider how JFK
affected the stock
market since he was a northern Democrat who took over from a
Republican, Eisenhower,
who had been Presidient for 8 years, 1952-1960. This was
a time when it
was widely held in business circles that a Democrat would be far less
favorable for business,
particulalry "Big business".
Mark Twain said: "History doesn't repeat itself, but it
sure does rhyme."
Presidential Election year of 1960
(Theodore
White's The Making of A President)
Here is the Tiger chart of the year 1960. Technical analysis usually wins out
over
heeding "raw
emotions". That was as true in 1850 as it is today. The DJI for the first
eight months held above
the DJI's 600 support level. During this time the Tiger's
Accumulation Indes was
mostly negative, showing that big money selling and "distribution"
predominated.
-- Peerless Chart of DJI for 1960 --
Honeymoon: 1961: Camelot and Wall Street
The stock market rose for most of 1961, with the exception of a mild July-September
correction which Peerless
would have called.
JFK and Business
Kennedy prior to his election tended not to consult business even when he appointed
the heads of federal
regulatory agencies. As Senator he had opposed the Taft-Hartley law.
As a millionaire, he
was less impressed with other millionaires. When he became President
he wrote:
"Taken individually, labor leaders are often mediocre and egotistical,
but labor as a whole generally adopts intelligent positions on important problems.
On the other hand, businessmen are often individually enlightened but collectively
hopeless in the field of national policy."
-- Source: www.signs-of-the-times.org/signs/editorials/signs20061120_JohnFKennedyandtheTitans.php
--
JFK versus the Steel Trust
The US News and World Report opined that "the President's action point inevitably
to a federal dictatorship
over business..." The press and the legions of dissatisfied business
people neglected that he
appointed Republicans to the key positions of Treasury Secretary
and Federal Reserve Chairman.
But in August of 1961 JFK was warned by his head
economic advisor, Walter
Heller, that a steel strike or a sharp rise in steel prices or wages
would "upset the
(economic) applecart all by itself." So, he sought to pressure both the steel
workers' union and steel
industry leaders not to increase wages or prices by 2.5%. He believed
he had their agreement.
On March 31, 1962, the union announced that thet it had agreed
to a new contract that would
have provided less than a 2.5% increase in wages and benefits.
But on April 10th, the CEO of
US Steel, Roger Blough appeared at the White House and
told JFK that his
company was going to raise its prices on average about 3.5% in June.
JFK was furious at being
double-crossed.
Within
24 hours Kennedy launched investigations by
the FTC and Justice Department
into
collusion and price rigging by the steel companies." To further show the
steel industries
he meant business, JFK began
to stop Pentagon contracts
from going to the steel industry.
These actions frighted Wall
Street.
Long before, this happened, savvy technicians who were watching the DJI-30 (which then
included US Steel) must have
noticed the bearish head and shoulders pattern the DJI was
tracing out. They
should have seen that the readings from our Tiger Internal strength indicators
were much weaker on the
pattern's right shoulder in March. The "neckline", the pattern's key
support, 680, was broken on
April 30th. But even before then, Tiger users would have turned
bearish, simply by
recognizing the price pattern. In addition, TigerSoft's OBV Line and IPA Line
(not shown here) showed
support breakdowns on April 3rd and April 11th. The timely Sell S17
signals warned of serious
divergences between apprarent price action and internal strength.
Selling and selling short
were clearly call for here.
As you can see from above, Wall Street soon swooned at JFK's attack on US Steel.
The DJI on April 10th
was at 695. Bethlehem Steel soon announced similar price hikes.
On April 11th, JFK released a
press statement:
"The simultaneous and identical actions of U.S. Steel and other
leading steel corporations, increasing steel prices by some six
dollars a ton, constitute a wholly unjustifiable and irresponsible
defiance of the public interest. In this serious hour in our nation's history,
when we are confronted with grave crises in Berlin and Southeast Asia,
when we are devoting our energies to economic recovery and stability,
when we are asking Reservists to leave their homes and families
for months on end and servicemen to risk their lives and asking
union members to hold down their wage requests; at a time when
restraint and sacrifice are being asked of every citizen, the
American people will find it hard, as I do, to accept a situation in
which a tiny handful of steel executives whose pursuit of private
power and profit exceeds their sense of public responsibility can
show such utter contempt for the interests of one hundred eighty-
five million Americans."
Soon FBI agents were at the homes
and offices of stell company executives, seeking
information that would build a case
for price-fixing. Two days later, Inland Steel and
Kaiser Steel announced that they
would not be raising prices and Bethlehem Steel
reversed itself. On April
13th, US Steel rescinded its price hikes. Milton Friedman
said this was the action of a
"police state" and the LA Times likened JFK to Mussolini.
Big business considered they had a
natural right to setting the prices for their goods,
except, presumably in war-time.
(See http://www.stocksandnews.com)
It is likely that much of the market's decline in this period had more to due with
the gathering US-USSR confrontation over
Cuban missles.
Cuban Missle Crisis
(Seehttp://www.yale.edu/lawweb/avalon/diplomacy/forrel/cuba/cuba041.htm)
There's no need
to recall the details of this scary period, when it seems the world stood
overlooking the abyss of nuclear anilation. The stock
market exactly mirrored the fears.
April 17, 1961 Backed by the U.S., a group of Cuban exiles invades
Cuba at the Bay of Pigs in an attempt to trigger an anti-Castro rebellion.
The invasion fails and more than a thousand Cuban rebels are captured by
Castro's forces.
June 3-4 JFK and
Khrushchev
July 27, 1962 Castro
announces that Cuba is taking
measures that
would make any direct U.S. attack on Cuba the equivalent of a world war.
He claims that the U.S.S.R. has invested greatly in helping defend his country.
August 10, 1962 CIA Director John McCone sends a memo to Kennedy
expressing his belief that Soviet medium-range ballistic missiles (MRBMs)
will be deployed in Cuba
August 31, 1962 Senator Kenneth Keating tells
the Senate that there is
evidence of Soviet missile installations in Cuba . Keating urges Kennedy
to take action.
September 11, 1962 In a speech
to the UN, Soviet Foreign Minister
Andrei Gromyko warns that an American attack on Cuba
could mean
war with the Soviet Union.
September 11, 1962 Kennedy orders a
U-2 reconnaissance flight over
western Cuba, delayed by bad weather until the 14th.
October 10, 1962 Senator Keating
charges that six intermediate-range
ballistic missile bases are being constructed in Cuba.
October 14, 1962 A U-2 flying over western Cuba discovers missile
sites. Photographs obtained by this flight provide hard evidence that
Soviets have missiles in Cuba
October 18, 1962 Gromyko and Kennedy meet for two hours. Gromyko
assures Kennedy that Soviet aid to Cuba has been only for the "defensive
capabilities of Cuba "
October 20, 1962 Kennedy's
Press Secretary announces that the
President is canceling the remainder of his campaign trip because of an
"upper respiratory infection." Kennedy meets with his advisors and
orders a defensive quarantine instituted as soon as possible. The full
operation is reviewed and approved, and the President's television address
is scheduled for the next evening.
October 21, 1962 Kennedy is told by
General Maxwell Taylor that an
air strike could not guarantee to destroy all Soviet missiles in Cuba.
Kennedy decides on a quarantine of Cuba for the time being. Another U-2
flight that day reveals bombers and Migs being rapidly assembled and
cruise missile sites being built on Cuba's northern shore.
October 22, 1962 Congressional leaders
assemble at the White House.
They express support, but some seek a more aggressive response...
The President addresses the nation in a televised speech, announcing
the presence of offensive missile sites in Cuba... US military forces go to
DEFCON 3....U.S. base at Guantanamo Bay is reinforced by Marines.
October 22, 1962 U.S. ships take up position along the quarantine line.
This is when market reversed course and turned up.
October 24, 1962 Soviet
ships en route to Cuba with questionable cargo
either slow down or reverse their course except for one....US Military forces
go to DEFCON 2 the highest ever in U.S. history.
October 25, 1962 Kennedy
sends a letter to Khrushchev laying the
responsibility for the crisis on the Soviet Union. White House discusses a
proposal to withdraw U.S. missiles from Turkey in exchange for the
withdrawal of Soviet missiles in Cuba.
October 25, 1962 Aleksandr Fomin, who was known to be the KGB
station chief in Washington, requests a meeting with ABC News
correspondent John Scali. Fomin proposes the dismantling of Soviet bases
under U.N. supervision in exchange for a public pledge from the U.S. not to
invade Cuba. Khrushchev sends another letter to Kennedy proposing
removing his missiles if Kennedy would publicly announce never to invade Cuba.
October 27, 1962 Khrushchev proposes a
public trade of Soviet missiles
in Cuba for U.S. missile in Turkey. Meanwhile an American U-2 is shot down
over Cuba killing the pilot... A U-2 accidentally strays into Soviet airspace
near Alaska nearly being intercepted by Soviet fighters... Soviet ambassador
Dobrynin and Robert Kennedy meet and discuss the price of removing the missiles
from Cuba. Kennedy writes Khrushchev a letter stating that he will make a
statement that the U.S. will not invade Cuba if Khrushchev removes the missiles
from Cuba.
October 28, 1962 Khrushchev announces over Radio Moscow that he has
agreed to remove the missiles from Cuba.
Once the Cuban Missle scare was over, the market
roared ahead. Stocks were in "strong hands". And the
market rose steadily until the mid-1965
correction.. A new bear market was not started until after the February
top in 1996. Not even the assassination
of JFK held the market back.
1963 - JFK Assassination
Would you have panicked
when President Kennedy was assassinated? Not a good idea.
The next day the market was up strongly. Of course, much of
American business was holtile
to Kennedy. Still, at first it seemed Oswald was a CIA
assassin.
There's more coming in my book on the stock
market since 1915 using the perspective of Peerless
Stock Market Timing. Stay tuned.
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