Shockwave coming..

"This economy is addicted to free candy from Washington..."

Think about that when you read this:

Why Rand Paul's Win Is A Horrible Sign For The Stock Market
Buzz up! 48 Print
Joe Weisenthal, On Wednesday May 19, 2010, 8:55 am EDT

Republicans are surely going to spin last night's primary elections as a huge night for the right, and a big rejection of Obamaism, but it wasn't that exactly.


The Tea Party right did very well with the victory of Rand Paul, but so did the left -- the moderate Arkansas Senator Blanche Lincoln is headed to a runoff against her more progressive opponent.


Basically, the night was a big rejection of the status quo, which is great! We need a shakeup, and we're actually very enthusiastic about Rand Paul, who we feel pretty sure will not be a sellout.


But let's face it: Right now this economy is addicted to free candy from Washington DC. It may not be sustainable, and an economy addicted to government money is necessarily going to be undynamic, but corporate America has loved the stimulus and its shown up in stocks.


But American austerity is coming. Well, we're not going to get a true "austerity budget" with massive chunks of spending taken off. But we are going to get a kind of austerity, whereby the here-and-there bailouts (states, teachers, jobs programs, etc.) will be a lot less forthcoming.


If you want a bailout, you better get it in the next few months.


In the past, it's been a common cliché that DC gridlock is good for stocks. That needs to be thrown out the window. We saw how stocks reacted to the momentary gridlock after Scott Brown, and we're seeing how markets are reacting to austerity in the UK and Spain (hint: not good).


We're about to get our own version of that, and it's a major risk coming for stocks.