Comments on: The Market Responds to Obama (Updated)

By: Dmac

Dmac — Sat, 22 Nov 2008 22:39:29 +0000

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.

By: Gerald A

Gerald A — Sat, 22 Nov 2008 18:05:17 +0000

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.

By: allan

allan — Sat, 22 Nov 2008 16:57:50 +0000

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.

By: rls

rls — Sat, 22 Nov 2008 16:48:40 +0000

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.

By: allan

allan — Sat, 22 Nov 2008 16:39:52 +0000

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…”

By: Mike K

Mike K — Sat, 22 Nov 2008 16:39:22 +0000

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.

By: Dmac

Dmac — Sat, 22 Nov 2008 16:10:04 +0000

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?

By: Da'Shiznit

Da'Shiznit — Sat, 22 Nov 2008 14:47:59 +0000

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.”

By: Da'Shiznit

Da'Shiznit — Sat, 22 Nov 2008 14:46:28 +0000

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.

By: EW1(SG)

EW1(SG) — Sat, 22 Nov 2008 14:00:40 +0000

#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.