Friday, March 6, 2009

Is Obama making the market go down?

In a word? No.

CNBC "pundits" (read: idiots) including Larry Kudlow, Jim Kramer, Rick Santelli, et al would like everyone to think that the market is declining largely because Obama isn't saying the right things. Markets do not enter cyclical, systemic downturns and stay there because the president says "boo".

In fact, the vast majority of the drop in both the DJIA and the S+P 500 occurred during Bush's tenure (and most of that prior to the election).

Second, keep in mind that the Nikkei, the Hang Seng, The FTSE, the Dax and nearly every other bourse in the world has been on a sustained suicide power dive for the past year+.
The problem we are facing is that people are not yet comfortable recognizing and acknowledging the following:
  • The fundamentals of the economy are NOT sound. Despite what Cramer or Kudlow tell you, there is a good reason that DJIA components are falling - because nobody is buying the things which the companies on the Dow make.
  • Wage growth has been quite low in the past 9 years and people have no cushion or purchasing power
The graph below shows the DJIA's performance over the past year. Enjoy.


  1. And Increasing taxes and the future burden will help our purchasing power how?

  2. It depends on whom you raise the tax burden on.

    Keep in mind that the taxation rate was much higher 15 years ago and wage rates climbed during that period better than they did after the tax cuts of 2001-2003. This is pretty much the lowest tax rate that American citizens have ever experienced. Is it a coincidence that the federal budget deficit has skyrocketed worse than it almost ever has while tax rates have been lowest? I don't think so.

    Essentially, under Clinton, tax rates were quite a bit higher under Clinton and yet everybody did more ok than they did when rates were lower. Curious.

    There is no evidence that cuts in taxes have any positive effect on wages. While tax cuts do improve purchasing power, all you are doing (as with extending more and more credit)is pushing into the future a day of reckoning.

  3. I do understand that the economy is a confidence game. You're right when you say that gloomy words from the pres do not turn down the market and keep it there, but when the Fed Chair says 'Yay' markets get a boost. He's not saying Yay. What does it do for American's economic confidence when many of the Treas Dept's top positions are not filled? Worse than not being filled, candidates are turning down the jobs, or aren't fiscally sound and legal themselves! (both elephants AND donkeys) We have 1000's employed by the department keeping the floors clean, but 3 or 4 at best working on this 'plan'?

    Are you confident?