MARKETS TANK ON OBAMA'S WATCH

As almost everyone knows, the equity markets are all about a view of the future. They are far less concerned with past or current events then they are with investing in what is to come. How the stock market reacts to what is anticipated next says a lot about how investors believe government policy will effect business and the marketplace.

Since the election of Barack Obama in November of last year, the news from the equity markets has been all bad. And the outlook remains bleak.

As the following article notes, there is a sense in the markets that the Junior Varsity team is now in charge. Obama has remained in campaign mode even though he has been in office, and in charge, for a month. While the nation needs meaningful, positive action, it gets continued campaign rhetoric and confusing, seemingly contradictory, policy direction. Now is not a good time for the rookies to be getting their sea legs.

No modern President has accrued the bad market reviews as has Obama. Many have faced rough economic realities but none have driven the outlook of the marketplace so far down, so fast. Our current government leadership is clearly not engendering any confidence within the investment community.

What has become obvious is that our politicians have not a clue as to what will work and what will not. Worse yet, they are primarily inclined to use this economic downturn to generate a crisis mentality as the smokescreen to spend taxpayer money on all of their favorite political payback programs. No wonder the private sector has had a negative reaction.

Massive government "stimulus" spending has sent business sprinting for the exits. Even the nonpartisan Congressional Budget Office has declared that the impact of this legislation over the long term will be a negative force drag on economic recovery. Thus stocks continue to slide as investors decide that there is no immediate future for their money in industry, corporations and therefore the American economy.

The lead indicator for a turnaround in our economy will be the return of capital to equity markets. When that happens on a consistent basis, it will signal a confidence in the future on the part of investors large and small. Until this administration and this Congress understand how that works, our economic recovery will remain on hold.

The policies of the Obama administration and the Democrat controlled Congress are not generating confidence in the future. As long as they stay on the payback spending path, there will be no change in that regard.

If they don't get it by November 2010, it will be time to vote them out of control and bring in a new first string.


Liz Peek: Stock Market Gives Obama’s First Month An 'F'
Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s Wall Street Weekly and SHEconomics.

Today marks the one-month anniversary of President Obama’s inauguration. In his brief time in office, the president has overseen three massive new spending initiatives — the $787 billion stimulus bill, the trillion-dollar financial stability initiative and, most recently, the $275 billion mortgage assistance program.
That’s a lot of activity, and a ton of money, but so far the reaction to the new administration’s programs has been decidedly negative. Investors, among others, have panned the plans; the stock market is off nearly 10% from the day before the inauguration, or more than 800 points on the Dow Jones Industrial Average.
Yesterday, in fact, we crossed a truly alarming divide. The Dow Jones average closed at its lowest point since October 2002, the bottom of the last bear market. The S&P 500 fell to 779, barely above the intra-day low of 741 of last November. For many market analysts, if the market crashes through that recent benchmark, it will next move significantly lower. Ouch.
What is going to turn this beast around, and what should the president do? First of all, let’s dispense with the antiquated notion that only rich people own stocks, and that the market’s ups and downs are unimportant. Almost everyone has a stake in our financial markets, either through owning stocks and bonds directly or through pension plans. Even the neediest Americans who are fed or clothed by charities are hurt when those organizations’ endowments crater or donations dry up.
Clearly, it is way too early for any of the new stabilization and stimulus programs to have taken effect. Why then is the consensus so pessimistic? Certainly the political wrangling of the past month has dispelled optimism that President Obama can change the contentious nature of American politics. Both Democrats and Republicans have spurned Obama’s leadership. The free-for-all over the stimulus bill portrayed Congress in the worst possible light — no surprise there — and led Americans to view not only the process but the bill with utter skepticism. Delivering a 1000-page bill to our legislators just two hours before the signing deadline (and then going on a long-weekend holiday before signing it) was outrageous. The mortgage relief plan hasn’t been received much better. Most Americans (ninety two percent, by some estimates) pay their mortgages on time; they’re darned if they know why they should bail out their neighbors.
At the same time, Obama’s own administration seems sharply divided between pragmatists and ideologues. For instance, one camp is pushing for protectionist measures while the other recognizes the dire consequences that "Buy American" provisions might deliver. Over the realistic objections of the National Economic Council’s Larry Summers and Treasury Secretary Timothy Geithner, it is said that Chief of Staff Rahm Emmanuel encouraged Senator Chris Dodd to, at the last minute, attach a punitive pay cap on Wall Street execs into the stimulus bill. This tug of war may also account for the gaping holes in the financial bill delivered with child-like upspeak by Geithner, and similar inadequacies in the new mortgage plan. The housing program stupidly omits an obvious need to insulate mortgage servicers from legal claims that they abridged mortgage-holders rights. Because so many mortgages were packaged and sold off to investors, immunity from lawsuits is a necessity if we want servicers to change mortgage terms.
The White House scramble has led to creeping fear that we’re dealing with the Junior Varsity. I’ve even heard people pining for former Treasury Secretary Hank Paulson — hard to imagine, right? (No one quite misses Bush yet; let’s hope it doesn’t come to that.)
Now we need President Obama to quit the campaign trail and start looking presidential. He needs to take ownership of the country’s problems and solutions. We all get that he inherited this mess, but as a candidate he had a lot of answers on how he would manage the clean-up; it’s time to get on with it. He needs to push his initiatives forward as quickly as possible, and create some optimism that spending trillions of dollars will get us out of this crisis. We know that having the government patch up schools or revise mortgages will be untidy and expensive, but the sheer volume of money being thrown at these problems will ultimately have an impact.
Even the expectation of help on the way could prove beneficial. I usually try to find some good news to share with wOw readers, and so I am happy to report that yesterday the Conference Board reported that its index of leading indicators rose in January for the second month in a row. The index turned negative in July 2007, heralding the downturn, and appears to have bottomed this past December. Items boosting the index are a strong rise in the nation’s money supply, improved credit spreads, a slight pop in new orders for nondefense capital goods and a modest rise in consumer expectations.
My concern is that recent events have squelched that optimism among consumers, and that the nation’s mood is even darker than it was a few months ago. Remember how Obama derided the “politics of fear?” He’s become its greatest champion.

All contents copyright © 2009 The Women on the Net Inc. All rights reserved.

Sphere: Related Content