The Dow finished up a measly 26 points yesterday, prompting the pundits to breathe a nervous sigh of relief.  The turgid action in stocks was taken to mean that there were no surprises for investors yesterday: not in the election results, which saw Republicans take solid control of the House of Representatives, though not the Senate; not in President Obama’s press conference, which appeared to have cracked the door open slightly for compromise on Obamacare and cap-and-trade; and not in an announcement by the Fed that the central bank plans to buy about $900 billion of Treasury debt over the next eight months.  Does it get any better than that?

We ask the question facetiously, since anything one might find to like about the day’s major news events could be spun negatively. We’ll concede nonetheless that the Republican landslide in the House is probably good news, since the deadlock it will produce on Capitol Hill means we are not likely to see any more legislative neutron bombs like Obamacare for the remainder of Mr. Obama’s term. However, we doubt the President’s sincerity in suggesting that he is eager to work out differences with the Republicans and Tea Partiers.  His extended hand reminds us of the recurring joke in the wickedly funny 1966 film “Mars Attacks!” Every time the Martians arrive on the scene with an olive branch in hand, they whip out an atomic ray-gun and turn every living thing in sight into smoldering charcoal.  Such, we fear, is the quality of Mr. Obama’s sincerity.

Putting the day’s political Sturm und Drang aside, there was still the not-so-small matter of the $900 billion stimulus.  The marquee number was actually $600 billion – just a tad above the $500 billion rumor that had been floated as a lowball estimate. But there was more, in the form of $35 billion each month, for eight months, to purchase an additional dollop of Treasurys with proceeds from mortgage bonds the Fed plans to retire.  We have ceased to be dumbfounded that the news media buy into this shell-game whenever it is run.

To be fair, there are more than a few economist who think that it will produce no economic result at all. They’ve got it about half-right, since the Fed will itself be paying for all that Treasury debt with…IOUs.  However, most pundits see only the supposedly “good” effects of the inflation that all of this double-entry accounting is intended to produce. A CNBC talking head, for one, averred that if Fed buys $600B of U.S. debt, it will produce a “wealth effect” three times as large, or $1.8Tr. We could digress by rolling on the ground, convulsed with laughter, upon hearing that this gargantuan Ponzi scheme is thought by some to create “wealth”. No, we’ll leave it to Rick’s Picks readers to savage this idiotic idea in the forum. But for the record, let us warn — as stridently as possible — that whatever “wealth effect” QEII appears to create in the stock market, it will be no less illusory or fleeting than the real estate “wealth” that so many were literally banking on just a few short years ago.