Tuesday, March 3, 2009


In the interest of full disclosure, I must tell you that I am no Wall Street genius. I'm still the lovable truck driver/hack writer that I've always been. That being said, the market is not nearly as complicated as people make it out to be. Playing the market can be very tricky, but watching and reading it is not that complex.
Think of the Dow, S&P, and NASDAQ as the voice of our economy in general. Other indicators such as gross domestic product (GDP) and the unemployment rate are also a good way to tell where the economy stands, but they lack the immediacy of the market. Unlike the market, the GDP and unemployment rates are not updated daily-let alone hourly, making them a "lagging indicator" and subject to many more factors over a longer period of time.
If you want to know how your economy is feeling that particular day and even that particular minute, the market is your best "bet" (no pun intended).

So, what is the market telling us today? Well, let's just say that if markets could talk, ours would be begging for mercy. The market is not happy...because it's terrified. The market is shaking in it's boots because it sees what's coming. It sees the seizure of capital by government. It sees the nationalization of industry. It sees the coming of universal (socialist) health care. It sees bailouts. It sees banks not being able to recoup their investments when they are no longer allowed to foreclose on defaulted loans. It sees people knowing they can get away with not paying their mortgages. It sees higher taxes for those who provide jobs, so consequently it sees that cost being passed onto the consumers...ALL the consumers. It sees that resulting in more layoffs, higher prices and business closings. It sees fewer "big ticket" items being purchased. It sees how the new leadership villainizes successful achievers, and profit in general. It sees expansion of welfare diminishing the incentive to loin the workforce. It sees trillions of dollars being thrown down a bottomless government pit with no "hope" of stimulating growth, or prosperity for anyone other than government entities. It sees the socialist agenda gushing from the White House. It sees the intervention of government into every facet of the private sector through excessive regulation and bailouts. But most of all, it sees no reason to be optimistic.

As the new administration goes out of it's way to make this the most business repellent country on the face of the earth, there are still those who are holding onto the whole "hope/change" mantra. Unfortunately for them, they too are going to enjoy the consequences of fiscal naivety. For now though, they are quite comfortable with the child-like notion that President Bush had single-handedly screwed up the economy so bad that the market is incapable of moving on, or that his predecessor is is incapable of fixing it without destroying it first. They're totally cool with Obama doing ten times as much of the same things that Bush did to create this "crises" in the first place, namely spending the tax payer's money. They have no problem dismissing the fact that Obama has ascended to the Presidency at almost the exact same rate as the fall of our economy.

You see, liberals somehow believe that the business community became successful by being stupid, or by not understanding how things work in the real world. They blindly follow a man who's never run a lemonade stand, and brush off the concerns of people who've built empires as "greed" or whining. Rooted in simple jealousy and bitterness, Obamoids scorn the businessman and support those who would make it harder - if not impossible for him to operate his business, then they turn around and complain when jobs become scarce. Insanity.

So for those of you who were shocked to see the DOW go into the six thousands yesterday, all I can say is "strap in...you ain't seen nothin' yet. My prediction is: 5000's by the end of March. Barring any major attitude adjustments at 1600 Pennsylvania Avenue of course.


JMK said...

The Stock market is indeed a good day-to-day indicator of how the investor community feels about American business Roady, BUT it responds to so many variables that it makes it a poor overall economic indicator.

Here’s why, the same market that will tank over bad news on the employment or inflation fronts will rise higher on reports of the government bailing out failing businesses – investors then sense confidence in investing in those businesses.

That’s why I see the Misery Index (the inflation and unemployment rates added together) is the best overall indicator of how the economy is treating the people...and to me, that’s the bottom-line.

In fact, the Misery Index has been a very accurate indicator of each President’s economic policies.

Nixon was a very Keynesian (Big Government) Republican and the Misery Index in his second term hit double digits, that remained high through all of Gerry Ford’s tenure. Then, when Jimmy Carter, a very eager Democratic Keynesian, inherited that very flawed and failing economy, he continued Nixon’s policies of overspending and bailouts AND the Misery Index soared under Carter. He became the first elected post-WW II President to preside over a full term of double digit Misery Indexes! The average annual Misery Index (MI) under Carter was 16.8 and he left office with a staggering, record high 22!

When Reagan took office, he brought down the Misery Index EVERY YEAR until it reached single digits in 1986, where it stayed throughout the rest of his tenure.

George Bush Sr. (who’d once called Reagan’s Supply Side policies “Voodoo Economics”) flirted with Keynesian policy again, cooperating with ted Kennedy on a large tax hike and he became only the second post-WW II American President to preside over four straight years of double digit MIs. Yes, his average annual 10.2 MI was dwarfed by Carter’s staggering 16.8 annual average, but George Bush Sr.’s was no bargain either.

Bill Clinton’s administration saw the MI improve every year AFTER the Gingrich Congress took office and we had some of the lowest MIs in four decades in the late 1990s.

G W Bush is an odd case. His ONLY two Supply Side moves (a Cap gains RATE cut that had Capital gains revenues soaring in its wake and an across-the-board income tax RATE cut that had income tax revenues skyrocketing in its wake) came early in his tenure and they masked an awful lot of overspending and over-regulation.

Sarbannes-Oxley was one of the most far-reaching and expensive pieces of regulation in our nation’s history, brought on by the business scandals (Tyco, Enron, etc) that broke in 2001, the prescription drug boondoggle, the NCLB Act contributed to MORE social spending (even adjusted for inflation) by the Bush administration than by LBJ!

Still, if it weren’t for the current credit crisis, brought on by the government allowing, even encouraging banks and mortgage brokers to “create credit (a form of wealth) out of thin air,” which has proven to be as disastrous as allowing banks to print as much currency as they liked, with the government backing it up, the ill effects of Bush’s overspending may well have remained masked for awhile longer.

What we have now is VERY similar to what we had back in 1976, a Keynesian Republican (Nixon then, G W Bush today) handing off a faltering and very flawed economy to a very eager Democratic Keynesian (Carter then and Obama now). Carter, like Obama, continues the overspending and the bailouts started by a Keynesian Republican and actually exacerbating them, by spending even MORE!

President Obama is following Carter’s basic blueprint today. Same policies will almost certainly deliver similar results.

Kofi Bofah said...

Stocks have come back off these lows since you wrote this...

Roadhouse said...

I still have eleven days.