Patterico's Pontifications

Methinks that investors are spreading the wealth into Cayman Island bank accounts.

Icy Truth (aedb2f) — 11/21/2008 @ 1:59 pm

So the market was up 500 points today because Hillary’s nomination?

The market is an ass.

parsnip (ff313d) — 11/21/2008 @ 2:04 pm

“U.S. stocks rallied and the Standard & Poor’s 500 Index rebounded from an 11-year low after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner to head the Treasury.”

Al (b624ac) — 11/21/2008 @ 2:16 pm

From Ace. Darn submit button.

Al (b624ac) — 11/21/2008 @ 2:16 pm

So does this mean that, so far, his decision tally reads: 1 RIGHT, 100 WRONG?

Icy Truth (aedb2f) — 11/21/2008 @ 2:21 pm

It means that the majority of investors are viewing Obama’s election as a tipping point. Time will tell if they were right or not.

At present, it’s generally going down, but not consistently, so there are still enough optimists left to be pessimized that the market can continue its overall fall for some time yet.

ras (fc54bb) — 11/21/2008 @ 2:34 pm

Thanks for the tip, Al. I’ve updated the post.

DRJ (8b9d41) — 11/21/2008 @ 2:49 pm

So, Obama brought the S&P up 500 points all by his lonesome? Wow, he really must be the Saviour and the chosen one. I guess he and leftist illuminati cabinet are going to turn our economy around pretty quickly after all. I can’t believe I doubted him in the first place.

Jeff (08332a) — 11/21/2008 @ 3:19 pm

Let’s see how year end tax loss selling impacts the market. Not to mention fund redemptions forcing some managers to liquidate or readjust t securities. And what will happen to some funds whose managers are replaced and the newby sells off the dregs and makes his own picks?

I note one of the bear funds was up 15% today. So I guess some of you are making a killing. There has been speculation of a big Obama spending splurge creating a sharp move up, but I’d be careful about any buy and hold.

Kind of funny that up is down and white is black, etc. Switzerland just turned in 70 American depositors to the IRS. The depositors stod indicted of NO crime. So much for banking secrecy.
And the Swiss bad mortgage crisis is proportionately four times worse than here in USA. So I guess we won’t invest in the Swiss Franc any time soon. I bet the Euro isn’t do so well either as money flows to US Treasuries.

madmax333 (0c6cfc) — 11/21/2008 @ 3:34 pm

Anything bad that happens in the economy is Obama’s fault. He willed it. He wants America to fail.

Palin in 2012. She’s the right choice.

Larry Reilly (d11f9a) — 11/21/2008 @ 5:56 pm

I thought that this was an appropriate summation of the way things are these days with the “Obama Effect”.

Thirty years ago I sold fifty shares of my company stock and had enough money to purchase a brand-new 1977 Ford pickup. Yesterday, I checked it out, and if I sold another fifty shares, I’d have enough money to buy a 1977 Ford pickup. So, the market has stabilized.

Mike Myers (31af82) — 11/21/2008 @ 6:07 pm

There are a few methodological problems (to use punditspeak) with directorblue–such as failure to rule out other causes for the market downturn, and failure to take into account that the financial crisis and market downturn catalyzed the swing to obama which Intrade illustrated. And if it were true, we should have seen an even steeper decline after Election Day.

I’m fairly skeptical about the stock market as a measure of the worth of an individual business, and I think the volatility of the market over the last two months is a good example of the unwisdom of crowds–everyone sees everyone else getting hyperanxious, so they become hyperanxious themselves. And until some of the chickens start regaining their heads, the market will continue on the present pattern. As to what will get those chickens to regain their heads, or when it will happen, I have no idea. I hope it’s soon, for the sake of my 401(k).
But I think it’s a token of the market’s priorities that most of the concern outside the conservative blogosphere is not what impact Obama’s tax changes will have on individual businesses and investment therein, but instead on what impact the tax changes will have on the capital gains realized from the sale of stocks. In other words, the focus is on the stock itself, and not on the underlying business.

kishnevi (feba14) — 11/21/2008 @ 7:15 pm

Can we thank Obama for falling gas prices too? Or is that somali pirates?

imdw (36ddaf) — 11/21/2008 @ 7:56 pm

I think if you’re going to blame a market downturn on somebody, wouldn’t you have to blame it on the party who still has his hand on the rudder?

truthnjustice (d99227) — 11/21/2008 @ 8:36 pm

Correlation does not imply causation unless it’s something bad and we can blame Obama for it, imdw.

Get with the program!

parsnip (ff313d) — 11/21/2008 @ 8:37 pm

I think if you’re going to blame a market downturn on somebody, wouldn’t you have to blame it on the party who still has his hand on the rudder?

We are.

Paul (creator of "Staunch Brayer") (56da7b) — 11/21/2008 @ 8:47 pm

wouldn’t you have to blame it on the party who still has his hand on the rudder?

Yup, Pelosi and Reid should not get off without their share of blame.

JD (b96a9e) — 11/21/2008 @ 9:03 pm

There’s plenty of people to blame for the economic turmoil but I think the stock market is reacting to the uncertainty about what Obama will do. That doesn’t make it all his fault — there is uncertainty with every new President — but I think there is a great deal more uncertainty with this President-elect given his vague campaign promises and tendency to sound like a socialist.

DRJ (a50047) — 11/21/2008 @ 9:46 pm

“In other words, the focus is on the stock itself, and not on the underlying business.”

kishnevi – Can you try that again in English. It sounded like a mass of contradictions and you completely lost me. Like the individual stock has nothing to do with the business underlying the ownership interest in the business shares which represent. Huh? Or that the U.S. already having the second highest corporate tax rates in the world faces higher corporate tax rates under an Obama administration should only be a concern of the conservative blogosphere. Huh?

daleyrocks (5d22c0) — 11/21/2008 @ 11:04 pm

#12 kishnevi:

As to what will get those chickens to regain their heads, or when it will happen, I have no idea.

I think your following observation,

the focus is on the stock itself, and not on the underlying business.

explains why it is a rare occurrence that stock value actually correlates to the worth of the underlying business.

Wall St traders live in an isolated bubble of their own, and very few actually understand what it is that they are trading~their abstraction doesn’t really have a basis in reality. So the sky is always falling (or about to), or the future is so bright I gotta wear shades.

#19 daleyrocks:

Like the individual stock has nothing to do with the business underlying the ownership interest in the business shares which represent. Huh?

I think his point that the traders often lose sight of that relationship a good one: kind of like the leftards making fun of McCain’s observation that the economy has a sound fundamental basis…well, it does.

Crops aren’t going to stop growing, livestock will continue to fatten up, grocery stores aren’t going to have empty shelves. A lot of discretionary consumer spending has been cut back in the last couple of months, no surprise given how long the Dems have been working to portray the economy as in the tank. And the lovely job they’ve done with Fannie/Freddie, et al.

EW1(SG) (e27928) — 11/22/2008 @ 6:00 am

Anyone see Obama’s Sloganomic proposal for rebuilding jobs?

More roads, more bridges, more schools, alternative energy. Apple pie and a chicken in every pot too!

Dude, this is lightweight and a repeat of FDR’s failure “feel good” policies from 1933.

Da'Shiznit (089453) — 11/22/2008 @ 6:46 am

Market has taken a dump since Obama was elected.

The bounce yesterday was “Well, at least he did not pick Che to run the Treasury.”

Da'Shiznit (089453) — 11/22/2008 @ 6:47 am

I watched the local PBS talking heads show last night, filled with the usual assortment of Chicago Obama cultists – but the surprising thing is that they all speculated that Obama wants the economy to keep on tanking, that way the bottom will be so low that it can only go up after his installment. But they also wondered if that was such a smart strategy, since who knows what the bottom really is at this point?

Dmac (e30284) — 11/22/2008 @ 8:10 am

I would ignore market behavior until the end of the year as any indicator of anything except tax driven and redemption driven selling. Of course, Obama is not the reassuring new president that might stabilize concerns. He will be a drag on the economy unless he gives up his economic plan, as best we can figure it out, and morphs into a real Republican, unlike George Bush, for example. This is going to be the worst bear market since 1974 and probably worse than that. We might be looking at 1937 for comparison.

Over on a lefty blog yesterday, I commented that this was not a Republican financial crisis because most of those fund managers and bankers who invented these exotic instruments that are going up in smoke voted for his guy. In high dudgeon, somebody posted this:

Re Wall Street is no longer a Republican bastion. Most of them are social liberals and have swung left.:

[my comment]

Here’s a listing/map of campaign contributions from people who listed Investment Banker as their profession.
Newer contributions are missing. Both the number of people and the dollar amounts are similar Republican vs Democrat:
$2,959,465 from 1,310 people to Republicans
$3,197,000 from 1,359 people to Democrats

The only professions I found in random sampling that skewed dramatically to Republicans were Police Officer:
$158,798 from 324 people to Republicans
$106,402 from 198 people to Democrats
and USAF:
$13,731 from 17 people to Republicans
$6,215 from 13 people to Democrats.

Posted by: Bill Arnold

So ?

A few comments later, the moderator announced that my comments would be deleted from here on as I was “taunting” them. Poor babies. And just after they reaffirmed my point.

Maybe they don’t know what “majority” means.

Mike K (2cf494) — 11/22/2008 @ 8:39 am

Dmac, that’s why they call it the “future.” [I sure wish you’d consider that jury posting offer, you have a lot of great perceptions that you back up with facts.] But you know how I like to start with the big picture and work down to little old me. Here’s something I read this morning, and then went back to copy it here for anyone that appreciates the larger view. It’s one of my favorite investing writers named Wm Bonner, an investment advisory publisher.

“…Investors all over the planet are taking a beating. Mr. Market has taken a cudgel to stocks, property, consumer spending and the economy – just as he did in Japan during the “Lost Decade.” People are afraid to lend and afraid to borrow; they worry that the money will be knocked senseless before it finds its way home.

This time, the economy did not overheat…nor did labor rates go up. And when the bubble popped, the pin was not higher lending rates. This bust was caused by too much credit, not by too little. It is what economist Richard Koo calls a “balance sheet recession” a la Japan in the ’90s. That is, it is a time when businesses, investors and householders realize that if they don’t cut back they could go broke.

And unlike the more typical recession, this is a slump the feds can’t control and can’t cure. They can offer easier credit; but more debt is just what both lenders and borrowers are most afraid of. The feds can offer more props, more handouts, and more public spending too, just like Japan. But all they are doing is retarding the correction. Mistakes of the bubble era need to be fixed. Balance sheets need to be brought back into balance. There’s no way around it. Japan proved it.

Just a few months ago, investors reached for the highest yields they could get. Now, they fold their arms, clutching to their breasts the lowest-yielding paper on the planet. Once they believed in capitalism and its bonds. Now, they want nothing that does not have the seal of the US government on it. A few months ago, they saw no danger. Now, they see nothing else…”

allan (c6e29c) — 11/22/2008 @ 8:39 am

The market is important, but is just one small part of the asset market. Obama’s stated policy objective to increase the cap gains tax at least five percent is causing a lot of turmoil in the commercial property and equipment market. I know several people (myself included) that are trying desperately to unload long held property prior to this change.

For some who have a very small bases that 5% looms big. It is also having an effect on the high end fine arts markets. I know collectors and dealers that are flooding the market right now. I’d like to unload a couple of high end paintings right now that I have held for years and maybe take advantage of some of the bargains that are going to be around the first of the year. Problem is, the supply is way out stripping the market. If I can’t sell prior to the cap increase, I’ll just continue to hold.

rls (14b9d3) — 11/22/2008 @ 8:48 am

I should add that large public business owners and other insiders are at this juncture have matched or exceeded all historical records for insider buying. That doesn’t portend any bottom by any means, but it’s something that the panicked never notice, then smack themselves on the head later. The reverse has already occurred when the insiders were selling large in 2006-2007, especially the builders.

There are distinct differences between this drop and the dot com drop. But the intermittent recoveries, or bear rallies, should have the same technical components. But it’s all just talk and conjecture. I’d rather follow the money, and get in the way of the next money flow while it’s just a trickle. Fun stuff.

allan (c6e29c) — 11/22/2008 @ 8:57 am

I think if you’re going to blame a market downturn on somebody, wouldn’t you have to blame it on the party who still has his hand on the rudder?

It’s an elementary principle that markets discount, i.e. take into account the impact of, future events. Finance 101 stuff.

Gerald A (adb85a) — 11/22/2008 @ 10:05 am

I sure wish you’d consider that jury posting offer, you have a lot of great perceptions that you back up with facts

Allan, always great to hear your insights regarding the crazy financial world we live in, particularly during these turbulent times. Regarding your kind comment, I think you have to be invited in the first place, and the other commenters selected do a far better job than I could, IMO.

BTW, regarding the earlier posting concerning the fine art market, I just heard a similar tale from the guy who did our wedding rings a number of years ago. He works independently, buying stones at wholesale prices and then doing the custom settings himself, at greatly reduced rates from what you’d pay at retail. He said that his uber wealthy clientele are desperately trying to sell their gems and fine jewelry, only to be stymied by a flood of same in the marketplace. Interesting times.

Dmac (e30284) — 11/22/2008 @ 2:39 pm

11/21/2008

The Market Responds to Obama (Updated)

29 Responses to “The Market Responds to Obama (Updated)”

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