Millions of people voted for Barack Obama no doubt because of the economy and the HOPE he would change it. Of course, now the market is reacting to the practical guarantee corporate taxes are going up which drives down not only stock prices, but the balances of Barack Obama supporter's 401k's.
Ah, is there any sweeter poetic justice when people shoot themselves in the foot?
Shame that the US had to shoot itself in the foot with my investments.
ReplyDeleteI had a strong feeling near the end of election night that the following day would see a big drop. Obama is likely to make GW look like one of our greatest Presidents. Do I smell Democratic Congress approval ratings?
ReplyDeleteThe presidential election outcome has already been rather clear for a week or two based upon both polling data and various prediction markets; thus, how can we conclude that the drop today was related to Obama's victory when that contingency should have already been priced into stock prices?
ReplyDeleteIt could be that the 91/9 split I remember seeing on Intrade on election day for Obama/McCain translated to the 5% fall in the DJIA today once the probability reached 100/0, but that seems unlikely: if one assumes naively a linear relationship between the drop and the uncertainty on election day, that would imply ~50% of stock values hinged on whether a borderline-senile old war vet or Muslim terrorist Communist-Nazi won the election.
However, given the constraints any individual would face while in office as president at this time, it seems silly to presume that either man would make substantially different policy decisions from the other whilst serving his term.
-JB
The media chose him as our saviour this summer. The market recognized him as our next president in October. Make no mistake about it, this was Obama's crash.
ReplyDeleteJB - Really? If McCain had won, he would have had to fight against a Democrat majority in both houses. Obama is going to govern with a Democrat majority (although not a super majority, thank God), most of whom are nearly as left leaning as he is. Watch for the folowing in the first year:
ReplyDelete1. Fairness Doctrine reinstated.
2. Bush tax cuts will expire.
3. Capital gains taxes will go up.
4. Cap and Trade will become law, and your electricity bill will skyrocket. He even said that his plan will bankrupt the electricity producers.
5. Global poverty act will become law. More of our tax money will go to the global war on poverty, which has been a resounding success thus far.
6. Corporate and small business income taxes will go up, forcing jobs to go overseas.
7. The private ballot for unionization will go away, union membership will increase, driving more jobs overseas.
How much of this would McCain have signed into law from the democrat congress?
Not to mention that we will no longer be heading for energy independence, because it is more important to pretend to be defending the environment, than to actually find real solutions to a man made crisis, using real science and proven techniques.
In 5 years time, I think I´ll welcome de US to the third world..
ReplyDeleteHas everyone forgotten that Obama wants (as does Pelosi and others) to take your 401K accounts / balances, put them under a federal program, only allow a 5% addition from you a year and only guarantee a 3% return. This is everyone'e 401K. Venezuela did it in the name of saving peoples investment money.
ReplyDeleteI smell Democrat dis-approval ratings in their near future
ReplyDeleteThe funniest thing is that the media has been reporting last night, this morning, and this afternoon that Obama's election had already been integrated into stock market prices prior to the election.
ReplyDeleteThey claim that this large 2-day drop reflects market fundamentals and is not a response to his election.
So right up until Election Day these leftists believed in fundamental analysis (a la Warren Buffett), and then the day after the election, they are hoisting the banner of the Efficient Market Hypothesis.
I think you need to send them a link to your Obanomucks post.
Their doublethink is absolutely amazing! We can expect to hear flimsy excuses for every Obama mistake, embarrassment, and consequence for at least the next four years.
Scott, your points may well supersede some of my own about the economic impacts of an Obama versus McCain presidency, but the core of my argument was that given the outcome of the election was no surprise, how can one seriously ascribe a subsequent drop in the stock market to that outcome?
ReplyDelete-JB
JB -
ReplyDeleteThere was much discussion on talk radio concerning the validity of the polls. I believe that many, myself included, had more faith in the American voting public to see through the glib style and lack of substance that was the Obama campaign. November 4 was a sad wake up call/reality check for many of us; I have to believe Wall Street included.
This article from Ann Coulter goes a long way to describe how many of us Conservatives feel about the recently passed election cycle.
I agree with JB that the results of this election are no big surprise, so it would be a mistake to attribute this latest swing to Obama's election.
ReplyDeleteIn a few years, after he's enacted a nine dollar minimum wage, hiked up capital gains taxes, promoted protectionist trade policies and launched health care insurance costs into the stratosphere by legally requiring people to own health insurance, then we can point to the smoking wreck of our economy and say, "Look at what Obama did."
Sorry to belabor the point a I don't need to have the last word, but Ryan, if JB is right about expectations of an Obama victory and the markets are efficient, rational and forward looking then they would have alreadt priced in all of the information about future raises in minimum wage, corporate tax hikes, etc.
ReplyDeleteThe uncertainty which remained on election day was the small percent chance Obama would lose but also his margin and composition of victory. In order to win in 2012 he still needs to govern from the middle and achieve good economic results so a closer margin would give him less of a mandate.
Then there was the unknown result of the senate races which makes a lot of difference.
I think much of the Obama drop happened before the election, some happened after, and some has yet to happen. Some of the post-election drop was fundamentals, but they were cast in the light of a different political reality.
I for one am loading up on stocks at bargain basement prices for a 20 year run. With negative real interest rates, bonds prices have nowhere else to go but down.
Robert, while I can see your point, I think there's a difference between the relative certainty of Obama being elected and the uncertainty of exactly how drastic his policies are going to be. It was pretty much a given that Obama was going to win the election; he'd been leading pretty heavily in the polls for weeks. The stock market can account for that information, although predicting the exact damage of his economic policies in the coming years is much harder to predict and thus has a smaller impact on the current stock market.
ReplyDeleteWell, for those of us who play the market daily, watch for obamas speaches, and times at which they will be made. Sell an hour before the speach, and buy back at market close. Help the economy? Everytime he speaks, he just reinsures that the nation is in the $h!@t3r. Then everyone sells. =] Play smart
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