The stock market will be fine.
Say that to yourself one million times until you believe it.
Believe it because it is the truth.
The stock market has gotten rocked in the last few weeks, and yes, we have recently experienced the “Obama crash.”
Now I know people will point out that since Obama has not been sworn in yet, he bears zero responsibility for recent downturns. This is false.
For the sake of full disclosure, I have been buying stocks as aggressively as possible with the disposable income I have. I believe the fire sale prices are a bargain hunter’s dream.
Before getting into the future, I want to offer a very cynical and destructive argument that I personally do not believe in. Let me reemphasize that point so those on the enraged left do not think I am accusing the President Elect of treason. The argument I am about to advance is farfetched, and I do not believe in it. I am tossing i out for intellectual consumption.
The theory has been proffered that Barack Obama, being a radical leftist, deliberately wants to destroy the stock market.
The rationale behind this is that the left in America despises the investor class. When the investor class prospers, they vote republican. People who prosper in the private sector are more likely to support privatization in general, for everything from airports to Social Security.
When the stock market crashes, leftists get to rail against privatization, and describe privatization as a “risky scheme.”
If enough people completely lose faith in the stock market forever, they will flee to “safe” investments such as Treasuries. They will seek another way to be “helped.” This help will come from the government. If only the left can completely destroy the stock market, they can get enough people dependent on government so that they can perpetually win elections.
I do believe the left is that vicious, and I also believe Obama is part of the far left.
However, the syllogism falls apart because I do not believe Obama would even think of planning such carnage.
Barack Obama is an ideologue, but he is first and foremost a pragmatist. He is already planning his reelection. Unlike his democratic predecessor, Obama is not going to wait until he loses Congress to protect himself. He is starting right now, and his first move is to embrace Wall Street.
This will enrage the left, which brings me to express a universal truth that I will devote an entire column to later in the week. Wall Street matters. The left does not. Wall Street is relevant. The left is not. Wall STreet can determine elections. The left has never won anything…not once.
Barack Obama has seen the stock market crash, and he knows that he is partly to blame. The decline began due to the financial crisis, but has steepened drastically since the election. He knows that Wall Street wanted his opponent to win. He also knows what makes markets crash. In the long run, corporate earnings matter. In the short run, two elements give Wall Street the jitters.
Wall Street does not like policies that cripple earnings. This is rational self interest. Barack Obama wants to raise capital gains taxes. He wants to enact one trillion dollars of new spending, including a health care plan that only Hillary Clinton could love. He is perceived as potentially weak on foreign policy, which is expected to increase foreign aggression, cause the price of oil and other commodities to skyrocket again, and cut into corporate profits. Throw in a plan to raise corporate taxes, and Barack Obama has our enemies smiling and our own corporations, who liberals think are the enemy, running scared.
The second thing that Wall Street detests is uncertainty. Wall Street likes stability. Barack Obama based his entire campaign on changing everything, which is a nightmare scenario for an industry obsessed with the status quo.
The status quo means that Wall Street likes continuity in the White House. They like two term Presidents. Even bad Presidents, the devil you know, beats the devil you do not know. Also, challengers have to say that life is terrible to get elected. Hearing about a terrible world rattles Wall Street. So Barack Obama is new, and Wall Street is nervous.
I will spend more time again later in the week explaining why I am not worried about Barack Obama as much as many others are. Let me make it absolutely clear that I will not be voting for him in 2012. I remain a committed conservative republican. I am just not worried…yet.
Neither is Wall Street. I suspect this is because they believe what I believe. Obama will sell out his leftist beliefs and principles to keep them happy.
His pick of Tim Geithner to be Treasury Secretary is being very well received by Wall Street. I know nothing about Mr. Geithner, except that he is the New York Federal Reserve Chairman. He one of Ben Bernanke’s Lieutenants. This is stability and continuity. Wall Street rocketed 500 points after his selection was leaked. If people want to blame Obama for the violent post election crash, which they absolutely should, then they must give him credit when he does something right.
Barack Obama wants Wall Street to calm down. Selecting Mr. Geithner is a good start. Yet what he most likely will do after getting elected is what matters. The prediction business has not always been kind to me, but my predictions are that everything will be fine.
Barack Obama is about to betray the left and run to the center. He is going to hold off raising capital gains taxes. He is going to curb the overarching health care reform in favor of incrementalism. He will issue a bland statement stating that “changing conditions have forced me to adapt and be more flexible.”
He will do this, and he will be right.
He might not even raise taxes at all. He will not make the Bush tax cuts permanent, but he might extend them another one to two years just until the economy recovers.
This brings up two truisms.
First, people are more likely to be screwed by their friends than by their enemies. Obama will have wide latitude to engage in the exact same economic policies as President Bush, but he will be given political cover.
Second, voters are not stupid. In the same way liberals blaming the failure of today’s inner cities on Ronald Reagan falls hollow, Obama knows he has a narrow window. Early on, he can blame everything on his predecessor. Yet if people think that Obama can play the blame game in 2012, and that 4 years is not enough time to actually do something, that argument will be laughable.
Obama understands what many liberals fail to grasp. Blaming republicans for everything is fine when the republicans are actually governing, but that strategy collapses when the the democrats take control. They actually have to “do things,” which renders most liberals clueless. Obama knows that he is seen by many as a talker. He wants to be seen as a doer.
Barack Obama is already “triangulating.” gays are rioting in the streets, and Obama is telling them to wait until 2010. He has “more important” things to do. This phrase will be implied every time he kicks liberals in the teeth, throwing them an occasional bread crumb. He will kick them like dogs in ways a republican could only dream of doing.
Obama knows that this is a center-right nation. He knows that enough Americans, despite the recent carnage, still believe in the stock market. Whether or not Obama wants to turn America into a socialist utopia is irrelevant. He will be judged by his deeds, which will be motivated by what motivates any typical politician…politics.
Obama is a conventional politician, only smoother. He may leave many young people disillusioned, but they will get over it. They will learn about the stock market, and if they are intelligent, they will begin buying while the prices are at rock bottom levels.
The stock market is not going to zero. Corporate America is not done forever. Happy days will be here again. The DOW Jones Industrial Average is almost 50% off of its high. It could go down further, but do not let greed lead to trying to get the very bottom. Do not let fear prevent entry until things have gone up.
This is not the internet boom and bust, which was made of air. Real companies that make real actual stuff and provide legitimate services are reeling. Human nature tells me that if I buy something and it goes down, I can live with that. If I wait for the perfect time and price, and things rocket upwards, that is deeper pain psychologically.
This is not about patriotism and supporting America. That is a residual benefit. It is about making sound business decisions.
Liberals won the election, but liberalism has not made a comeback. They cannot control Wall Street.
Wall Street will be back.
The stock market will be fine.
eric
President Elect Obama has already put in his economic team in place barely three weeks after he was elected He is now telling the nation what he plans to do immediately after he takes office. The group of individuals he has selected is young, experienced, pragmatic and remarkedly free of ideological preconceptions (for a change).
Obama’s economic recovery plan will focus on infrastructure, new green technologies and other efforts to get millions back into jobs. It is a plan (hopefully) for both Wall Street and main street – not just Citicorp.
The President-Elect is asserting leadership at a time when the the Bush administration has all but abdicated it.
Jafman, wake up, where have you been ?
Bush is meeting with Paulson today and has applied as much leadership as any one man can during the last few months. You cant be serious.
In the meantime, Obama has shown zero leadership by only selecting staff.
While that may have its collateral effects such as his Geithner pick did I would hardly call it leadership.
Green tech will not create more employment, its a red herring. Many of the technicians/researchers and such in the industry are already in place as it is. Any new green tech jobs will simply offset the ones lost in the fossil fuel industry, such as the coal industries that Obama said would bankrupt themselves.
————————————————————————————–
I’m not a great financial wizard, but I do know my basics.
If government will leave Wall street alone it will be fine.
I agree with Jafman wholehearted, Eric, to a point, and Micky, well, not at all.
Obama is not and was never a far-left ideologue. He’s an intellectual pragmatist and a master of the politcal art of compromise. He isn’t about “triangulation,” but rather consensus. That’s a good thing to anyone who’s not an ideologue. Both the far-Right and far-left will be angry at him for this, but the majority of Americans, of every class, will probably be pleased. Obama is still being careful about his promises and apparently is patiently waiting for 1/20 before he makes any substantial decisions. This is good too.
As for Wall Street – they are Risk Averse. So, as Eric said, they are afraid of change – any change. It’s not because they fear Democrats (history shows Wall Street does better when the Democrats are in power), but simply because the status quo is a lot easier to bet on than change. Risk Aversion is why Voo Doo Economics always fails. Money does not “Trickle Down,” but tends to fix in place at the top. The majority of the wealthy are not wealthy because they took risks, but rather becauise they didn’t. They made “safe bets” hedged by a state Corporatocracy that enforces a disbalance of capital against labor, nationally and internationally. The trouble they run into, like the current fiunancial crisis, is not caused by risk, but by the moral hazard created by the hedging of markets in their favor. And it’s not a matter of a few bad apples – it’s the whole barrel. America is a crooked economic state.
And I never understood this whole “center-right” thing. Sure, a small majority of Americans may describe themselves with such a term, but when you look at the issues, Americans are all over the place. You really can’t pin them down to any simple placement on a right/center/left graph.
Take these polls…
http://www.harrisinteractive.com/harris_poll/index.asp?PID=927
A large majority of Americans believe our healthcare system requires major changes…
http://harrisdealerpoll.com/harris_poll/index.asp?PID=493
…that healthcare costs are too high and the gov’t should limit prices…
http://www.harrisinteractive.com/harris_poll/index.asp?PID=608
…and want national, universal healthcare insurance.
That’s not “center-right.”
And that’s just healthcare. On countless other issues, Americans’ attitudes range from what the popular media would call anything from far-left to far-right, but to most regular people would actually be just “common sense.” Some attitudes are just dizzying. Take trade (http://www.businessweek.com/2000/00_17/b3678004.htm). Americans can’t seem to figure out what they think about trade. It’s good, it’s bad, it’s all over the place. Perhaps this is because the Corporatocracy has convoluted thissue to the point where people can’t even see the facts on the ground. I don’t know. On war, Americans are as fickle as the breezes. They were clamouring for war after 9/11 and now are not only sick of it, but have become completely ambivilant, with polls showing the GWOT barely a blip on the polity’s radar. So, I don’t know where people get this whole “center-right” thing. I guess it’s just something to make conservatives feel good about themselves – like poopulists. But of course, they are not really populists, just rabble rousers when it suits them. It’s the ol’ eye’s off the prize method of governance – when everything you do fails, divert attention to some stupid morality “issue” or start some stupid war.
JMJ
“and Micky, well, not at all.”
On what subject ?
That Bush has not shown leadership ?
Or that Obama has not ?
If the congress/administratio succeeds in imposing regs and cap taxes I hardly see people investing, rather selling.
“A large majority of Americans believe our healthcare system requires major change ”
Yea so ? That would include the center right also.
But what changes ? Socialized medicine or reorganizing the structure in place ?
JMJ- I don’t know where to begin except to point out that wealth does not fix itself at the top. Study after study has shown that people are better off than their parents and grandparents and that their situation improves overtime (http://www.heritage.org/Research/Welfare/bg1796.cfm). The rich may be getting richer but so are the poor.
Furthermore, to say that Obama is not far-left is ridiculous. Not only was he voted the most liberal Senator (http://nj.nationaljournal.com/voteratings/), he he is consistently far left on economics, the abortion issue, war, and healthcare.
Also, just because a lot of people want a change in healthcare, it does not mean that a lot of people want it nationalized. Most people have been blatantly lied to and told that nationalized/socialized healthcare will be free.
Lastly, what the market is experiencing right now has been mostly caused by the government (http://likeitornot.blogtownhall.com/2008/09/18/time_to_regulate_regulation.thtml) but thanks to capitalism we are witnessing market correction and self discipline.
Great blog Eric.
Good point Micky. And may I add: Obama does have a responsibility and can take ownership of this market turmoil (the Dow is down over 20% since his election).
I think the responsible, and most politically expedient, thing for Obama to do now is say something to this effect:
“During obviously tough economic times, caused mostly by white people, republicans, and capitalism, it would be irresponsible for me to raise taxes on capital gains and dividends (someone just told me what they were) during my first of at least two terms. As such, I promise that no such tax increases will take place. Hope! Change! Yes we can!”
Seriously, this isn’t a hard fix: deregulate, make permanent the so called “Bush tax cuts,” and stop rewarding failure by bailing out companies that don’t deserve to succeed.
http://finance.yahoo.com/echarts?s=^DJI#chart1:symbol=^dji;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
How is it that doing exactly everything that preceded this latest financial downturn would somehow repair the downturn?
You guys never learn, huh?
And I love the ‘blame Obama’ shtick. How’s that for passing the buck – or in this case, the devalued buck. If Wall STreet fears Obama, perhaps Wall Street is doing something wonrg, huh? Gee. Ya’ think?
JMJ
Imus wonders when will it be safe to laugh again?
http://imustimes.wordpress.com/2008/11/24/imus-obama-comedy-embargo/
Turns out what Senator George F Allen of Va., Per undoing the terrible legacy of “Walter Plecker Infamous Eugenist and Nazi sympathizer” benefited Barack Obama’s kin too.
http://www.wargs. com/political/ obama.html
Barack’s 4th-grandmother was Anna Bunch. I think this is one of the
Bunch lines that is considered Melungeon. Barack’s father was from
Kenya, making him a “true” African-American. No doubt there was some
other “color” on his mother’s side also.
I know a fellow Melungeon researcher Don Collins who also contributes to Sarah Palin 2012 Blog, he matched two of Barack Obama’s mother’s side of the family. Those Bunch were from Bertie Co.,N.C. this would be Obama’s mother’s side of the family. Don Collins Core Melungeon DNA participant. Donald Collins does not display his African descent but his halo type is E3a Subsaharan African.
http://www.wargs.com/political/obama.html
Laree, a lot of people don’t care to be referred to as “Melungeon.”
I have to say, you have a rather strange facination with race.
JMJ
[…] Bloggers Select Their Least Favorite People On The Left (2008 Edition) Tygrrrr Express: The Stock Market Will Be Fine Thomas Brewton: Be Thankful Changes at the Pink Flamingo Blog Linkzona: Winter of our Disscontent […]
Hey look! A bump from those guys over at “Stop the ACLU”! Now, that’s a fun bunch. If you ever wanted to see irrational hatred on full display, check out STACLU. What a bunch. God forbid we have people out there who support our civil liberties. Jeez.
JMJ
“How is it that doing exactly everything that preceded this latest financial downturn would somehow repair the downturn?”
Yea like the 30s and 40s ?
Obama is making all the same mistakes that was made then.
Micky, what the heck are you talking about? Obama hasn’t done anything yet! And what exactly is he proposing that resembles “the same mistakes” – and what “mistakes” are you even talking about???
And again, how in living h#ll does doing the same things that caused this mess make this mess better???
You guys are living on another planet, I swear! Just how many times do you have to see your ideology fall flat on it’s face, causing ridiculous woe and misery, before you finally man-up and realize that you’re just plain wrong??? It’s getting to the point that I’m not so sure you guys are even real! Maybe your just internet plants, I don’t know! I can’t imagine what it must be like to be so consistantly, utterly, indefatiquably wrong all the time! I’m beginning to think you cons are all completely insane! I mean, I can undertand the wealthy profiteering from the miserable failure that is conservatism, trying to rationalize and justify their behvaior and ideology in order to sleep at night, or at least to avoid facing the guillotines, but what I can’t figure is how regular middle and working class people fall for this shlock. I mean really? You really still think tax cuts for the wealthy, free trade, and deregulation – all the &^%%$# time – are good ideas? Now? Even now? Really? Still wanna run that race to the bottom? Really? Really??? Are you sure your water is safe to drink? Maybe a little too much lead? Do you feel dizzy all the time? And perpetual war? Really? You still think that’s a good idea? Don’t see any faux Keynesian irony in that? When you look in the mirror, do you think perhaps you’re actually watching the Fox “News” channel? C’mon guys!!! Get real!!!
JMJ
This is one of the most intelligent and well thought-out pieces on our economy that I have read in the past few weeks. You also have a grasp of what makes Pres-Elect Obama tick; that is, what his true agenda is. The hard Left really thought he was One of Them. He is not. Neither is he on the Right, but in the center, as you stated. Neither is he prepared to pay for Peggy the Moocher’s mortgage. It’s just too bad that there are so many naive people duped into believing that Obama is their saviour. He is not. He is the President Elect of our country, and I think he bit off more than he could chew. I feel sort of sorry for him. Still, he’s got a bevy of advisers all around him, even if they advise him poorly. When that happens, he can blame them when things start going really wrong, as he is merely a puppet in their very capable hands. If anyone wants to see capitalism in action, go to Las Vegas and watch people blowing their money in the slots. Now, that’s where a lot of hard-earned savings are going, but who cares? Aren’t we suppose to share the wealth? By the way, I didn’t wager one penny when I was there two weeks ago, not wishing to share my wealth with anyone. Perhaps I have contributed to the depression by not flushing my precious cash down the toilet, i.e. the slot machines. I prefer to spend money for something tangible, something I can see and feel immediately, like shoes or a new coat. The malls are full of people, not just window shopping, but spending money. They have shopping bags. Wall Street will be fine, as you said.
Jersey.
Obama just wants to keep feeding and bailing out failure.
He is the one who is and will be revisiting the mistakes made in the 30s and 40s.
Were not stupid Jersey, we read, we remember and say from that what reflects our opinons and sentiments.
Its really you who looks like the nut when you blab off all the really nice things you say about fairly educated folks like…
Internet plants, consistantly, utterly, indefatiquably wrong all the time, you cons are all completely insane, fall for this shlock. lead in our water dizzy,not real
Dont tempt me to pull out quotes from you that are quite simply some of the most hals a$$ crap I’ve ever heard.
The elaboration on the vocabulary just makes it look like you’re trying to hard to be a complete idealistic zealot that cant see anything but bad un less its your recipe.
I dont know, I think maybe your difference with Eric may be more an educational/intellectual one rather than partisan in the case with the market.
Its what he does, and Im sure he knows a hell of a lot about his profession than you do.
But then again, I’m not surprised, you know it all, you even tried to tell me, a professional chef and restaurant manager how to run a restaurant after you only slung hash in some greasy spoon somehwere at one time.
[…] Tygrrr Express is optimistic this week, and explains why The stock market will be fine. […]
I think the market will go down to at least 7,000 and possibly even 6,000. We are so mired in debt and the international situation is so messed up as well that it seems unlikely that a further reduction in value is not likely. As the increasing level of debt starts to effect the economy even more than it has, there will be (further) inflation for the working class and (further) deflation for the capital class, i.e., asset depreciation.
I do not disagree with the stratgegy of buying but I would wait a bit longer unless you can foresee plays like buying Citibank before their last bailout. Save up your money for another year at least. If things do not get better wait another year, but then, there may be a slight rise before another big dip. We are in deep dooooo…..
The best thing that can be done is to get US off imported oil. That would be to mandate the building of flex fuel vehicles that can burn ethanol an methanol fuels and fund the building of the transportation and energy infrustructure to deliver it. It would be worth over $1 trillion a year to the economy and start to turn things around — while reducing our trade deficit hundreds of billions and increasing tax revenues without increasing taxes. It would be a win-win-win.
Jarrow