Wednesday, January 20, 2010

Credit Scott Brown for Obama's stealth bull rally 

I'm always amused when the druids at Fox News discuss how political elections might impact the stock market. Wouldn't you believe it? Their analysis always seems to support a persistent yet grandly false myth: that Democrats are bad for stocks.

Actually, despite what Fox News and Norquist the Grotesque believe, stock returns are demonstrably superior during Democratic administrations. But Dems don't ever make political hay over this amazing fact because that would be impolite, or politically shrewd, or something. Dems would rather cower in the corner and leave the storytelling to the Republicans (and their news organs)... who are happy to oblige.

In 2004, Fox was warning us about how Presidential candidate John Kerry was going to deliver a "gut punch" to "your stocks". During the "Bush Boom" bull rally* within the ongoing secular bear market, Fox News dutifully linked the "surging" market to Bush's War on Terror in Iraq. When the market cratered during the final years of the Bush presidency (here's a graphic of those years), new explanations were required:




See that steep drop off at the end of 2008? Well, during one of those awful autumn days there was a $1 trillion drop in market value. David Callaway of CBS Marketwatch put the numbers into perspective as follows (9/29/08):

While groups of politicians bickered like schoolchildren over the failure of the House of Representatives to pass Treasury Secretary Henry Paulson's $700 billion bailout plan, the S&P 500 Index plunged to its worst day since the week of the 1987 stock-market crash, wiping out more than $700 billion in the index's market value.

In other words, we all just spent that $700 billion today -- and still didn't get a rescue plan.
...
In total, more than $1 trillion was wiped off the value of the entire U.S. stock market Monday, as measured by the Dow Jones Wilshire 5000 Index.

House Republicans blamed the failure to pass the bailout that day on Speaker Nancy Pelosi, who made a partisan speech that hurt their delicate feelings. You can bet that many of these same Republicans will later point to this NAY vote as evidence of their courageous resistance to socialism in order to court teabagger support when they run for re-election. But the main point here is that a trillion dollars of value was lost in one day during 2008, when Congress failed to pass a $700 billion dollar bill. When the market moves hundreds or thousands of points, trillions of dollars of value are gained or lost. When you see that the Dow had a net loss of over 20% over EIGHT YEARS during Bush's term... that is an immense amount of wealth destruction for the ballyhooed "investor class".

As stocks continued their swoon during the last months of the Bush administration, perspicacious Fox News pundits again knew who was to blame: President-elect Barack Obama.

Gretchen Carlson: “There’s a lot of feeling in the market not reacting very well to the election of Barack Obama.”

– Fred Barnes: “We have seen the stock market go down over 800 points the last two days. There is great uncertainty out there about [Obama's] policies.”

– Dick Morris: “Now the other thing that I predicted... is that the stock market would go crazy after [Obama] was elected. Not just because he’s a radical, not just because he’s a Democrat, but because he’s going to raise the capital gains tax. [...] Its going to continue to tank.”
So Obama takes office during a wicked Recession, and stocks continue to go down for about two months and the squeals from conservative pundits were intense. In March, I called in to local conservative pundit Jeff Crouere's radio show. He and a guest were directly correlating the slide in stocks to Obama's policies. CNBC showman Jim Cramer even beat the drum a bit that month:

Cramer called President Obama's budget a "radical agenda," adding, "This is the greatest wealth destruction I've seen by a President."

Kevin Hassett, economic advisor to John McCain's presidential campaign and co-author of the 1999 masterpiece Dow 36,000, had this to say in a 3.09.09 column titled ‘Manchurian Candidate’ Starts War on Business:

Now that we have seen President Barack Obama’s first-year legislative agenda, we know what kind of a war he intends to wage.

It is no wonder that markets are imploding around us. Obama is giving us the War on Business.

Let's review what that radical socialist Obamajokerhitler was saying about equities back in March:

In March, as share prices plumbed new lows and the economic malaise seemed impossible to shake, Mr. Obama was one of the few to call the bottom for the stock markets. At those levels, with U.S. stocks down by half from their 2007 peak, he said that “buying stocks is a potentially good deal if you've got a long-term perspective on it.”

But Joe Sixpack and Mary Teabagger wouldn't be baited into putting money into the market during Obama's radical socialist agenda-- hell no. They listened to FOX, and Rush and Hannity... etc. They wouldn't be fooled. They wouldn't risk their precious (negative) gains from the Bush years while the Islamic Manchurian Candidate was in charge. So let's inspect the carnage that became of the markets in the past ten months, as Obamajokerhitler's radical socialist agenda was presented and implemented, and Wall Street had time to react to it and digest its implications with all due horror:



Huh? That move from 6500 to over 10,500 represents trillions of dollars of added market value. Does not compute.

The above chart shows gains of around Eighty Percent since the March low, when conservatives were happily attributing stock losses to Obama's socialist "war on business". Yet, when stocks climbed upwards, conservatives didn't say much about why such a rally could occur during radical socialist Obama's reign of terror. Nor were they asked to explain themselves. Dems could've asked simple questions like: if the losses were Obama's fault, shouldn't he get credit for the gains? Why does Wall Street love Obama's socialism? If Obama wishes to radically transform this nation for the worse, why is the market reacting so favorably? Why were your earlier analyses and predictions so incredibly off-base, and do you feel like you were wrong when you forecasted utter disaster in the markets and they proceeded to move inexorably higher over the past ten months, to the tune of eighty percent? Do you believe that eighty percent over ten months constitutes a superior return than a loss of twenty percent over eight years? Why do stocks perform so much better during Democratic administrations versus Republican administrations?

These questions, of course, would be politically winning for Dems, thus they refuse to ask them.

Let's return to Obama's sober observation in March that it might be a good time for a long-term investment in stocks...

About the only thing (Obama) the forecaster-in-chief got wrong was the time frame. Nine months later, stocks have staged a recovery that is nothing short of incredible. Around the world almost every major market finished the year up about 20 per cent or more – much more in the case of Brazil, at 83 per cent.

In fact, the gains in stocks in almost any one of the months since March would qualify as a good annual performance for shares most years.


Contrary to the hysterical conservatives squealing like stuck pigs back in March-- Obama perfectly called the market bottom, and those (few) who listened to him made upwards of 80 percent on their money. Nearly everyone who stayed in the market during 2009 netted 20 percent or more, which offset some of the losses from the Bush years. Now, I'm aware that severe corrections could be around the corner, and I'm holding to all my earlier long term predictions made five and a half years ago, that '99 to 12 will mirror '68 to 82. (I hope I'm wrong, btw.) But last year is in the books, and performance is performance. Since those who made catastrophic (and catastrophically wrong) predictions about how the market would perform during Obama aren't held to account, and since Dems are determined not to take advantage of a favorable political issue... we're left with this sort of idiocy: Fox News openly campaigning for Senator-elect Scott Brown and saying his election could "boost" your portfolio. Wow. What an amazing belief system these people have. So I guess this continuing rally that began in March will be the "Brown effect"...that is, until there's a 19 percent correction and then Obama will be once again responsible, and Dems will say nothing all the while, as the foolishness cycles through, again and again.
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Update: The Hayride dutifully chimes in, with its quote of the day post:

“A Republican win (in Massachusetts) would be a positive for the markets since it would mean increased potential for gridlock in Washington.”

- Carmine Grigoli, chief U.S. strategist at Mizuho Securities USA in New York.


Of course, the markets have ALREADY been suffused with "positives" for the past ten months. There's been an incredible rally, yet Dems have ignored it and now Republicans want to credit the implications of Scott Brown's victory for any gains.

We'll note that the markets dropped like a stone this morning when they had a chance to "react" to the election results. However, Republicans can safely ignore this inconvenient result because they're never called on their silly games. When the market goes down, Dems get the blame and when it goes up Goops get the credit-- no other possibilities exist! Yet, a century's worth of data shows that on average the market performs significantly better during Democratic presidencies, but hardly anyone knows this. If you're gonna play these silly games, why wouldn't you force your opponent to eat that fact?

Imagine, if you will, that Coakley won last night and then stocks dropped 2 percent like they did this morning. It would become an iron law of the universe that the declines were a reaction to her victory and Obama's socialist agenda ... etc. The reverse occurs, and ...silence.

Maddening.

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* which admittedly lasted a year longer than I thought possible

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12 Comments:

This is why the GOP has much better storytellers: they come up with new fantasies every few months.

Democrats are just now looking at these figures from the last year, and might meekly mention them sometime in the near future, maybe in a memo or internal report.

The GOP is already trotting these numbers out as a demonstration of how out-of-touch the Democrats are. "Yes," they say, "stocks may have gone up, but people still don't have jobs!!!"

What they've said in the past is irrelevant, because credibility doesn't matter to marketers.

By Blogger Cousin Pat from Georgia, at 10:42 AM  

Actually, the Goops haven't mentioned the stock market much since March ... except for the past couple of days, they started connecting it to the election in Massachusetts, which seemed odd.

By Blogger oyster, at 10:53 AM  

True. Sorry, I was connecting too many dots at once.

Market analysts mentioned the upward stocks while explaining the recession was over. Part of the "stimulus stopped the economic freefall" truth.

The GOP storytellers pointed at them and called them "out of touch," because people still didn't have jobs.

Repeat "but Democrats think the recession is over, but we know better" ad nauseum.

Not having to mention positive news while defaming your opponent is a big part of the "game."

By Blogger Cousin Pat from Georgia, at 1:19 PM  

That's true. The use of the recession thing is also interesting to me, and I'll write about that soon.

By Blogger oyster, at 2:40 PM  

oyster,

Quite a legacy for Teddy Kopechne, wouldn't you say?

The Liberal Lion of the Senate, who was so ineffectual no one ever bothered to try to off him, tried his entire career to get Universal Healthcare signed into law.

"His" seat-in one of the most liberal states in America, which also happens to already have Universal Healthcare Coverage, ironically enough-is lost to a Republican who at this very moment stands in the way of final passage into law?

What a fitting end to one of the most vile, morally repugnant members of the Senate to ever walk the halls of Congress...and knowing all the crooks, pervs, & weirdos that have come through that place, that's saying something.

Seriously...You think Mary Jo got out & voted along with Teddy yesterday? I'm sure they did...

BTW-Off the topic of my cynical little rant here...I heard that Mary Jo Kopechne was set to leave New England to come work on Moon Landrieu's campaign before her "unfortunate accident". Did I read that here, or was it elsewhere? Ever heard that, erster?

By Blogger GO, at 3:30 PM  

Typical GOP response...

By Anonymous Puddinhead, at 5:20 PM  

GO, I'm not sure where you read your Kopechne stuff... I doubt it was YRHT-- seems like you just skim what is presented here, anyway, and comment about whatever topic is on your mind.

Of course, when I write a post praising Sen. Vitter, you are suddenly AWOL or mute. Then in a few weeks you'll rag on me for being blindly partisan.

New tricks, please.

By Blogger oyster, at 6:09 PM  

It gets worse and has nothing to do with anything real but Republican Penis Envy:
http://www.huffingtonpost.com/2010/01/20/scott-brown-daughter-biki_n_430291.html
BTW, I'm calling him: "Cosmo Brown".
Has a nice ring to it.
American Idolatry! You know how weird they get about women.
Yaaaaaaammmmmmm...tasty!

By Anonymous Editilla~New Orleans Ladder, at 8:17 PM  

oyster,

C'mon...Don't be such a wet blanket.

Vitter's a joke. I've mentioned it as much here, multiple times.

I've also said that when compared to Melancon-again, I posted this here-I'd trust Vitter with my checkbook quicker than I would Cholly...

I'll state it again...Vitter's a joke, a hypocrite, & a liar...But, I trust him with my money.

I can't say that about the other side.

By Blogger GO, at 11:25 PM  

"Vitter's a joke, a hypocrite, & a liar...But, I trust him with my money."

That's part of what this post is about-- who do you trust (more) with your "money". A lot of people have investments and retirement funds tied to the stock market. There's a massive, long-term trend favoring the performance of stocks during Democratic administrations. Hardly anyone knows that, and the GOP and its fellow-travellers act like the reverse is true-- with no political penalty.

Now, I'm not saying one should use a single factor or trend to make investment decisions. However, the returns during Democratic administrations on average significantly exceed the returns during GOP administrations. So if you're going to play the silly "Is Brown good for your 401k?" game, then you should get smacked on the head with these statistics.

Since you brought up "your money", GO, Who would you trust more with your 401k: Bush or Obama?

By Blogger oyster, at 11:08 AM  

Okay, let's play it this way...

Would I want BILLIONS of dollars being spent of our money going towards ACORN?

After what I've seen them do on camera (Wait...That was a joke, right?), and in very, VERY highly dubious "get out the vote efforts" nationwide in our last election, no I do not want my money being spent on them.

Do I want federal tax dollars to put me out of business by subsidizing a company like NACA?

No, I do not...

Do I want my money being used to set up a "Carbon Exchange" or "Insurance Exchanges"?

I really don't want my money being stolen from Social Security, either, but that's another digression...

I am not invested in the stock market, though my retirement is. As far as "investment advice" is concerned, I think that in general, the argument is a non-starter. If you really want to be comfortable later in life, you'd better "invest" your money in some passive income generators like real estate, rental units, etc. But, that's coming from a 31 year old whose still building towards that future...whose far from an expert.

I for one am not going to depend on any market for a future...I will obviously have a retirement that is dependent upon the whims of said market, but if you think that's all I'm hoping on, forget it.

You misunderstand my meaning, though...When I say who do I trust my money with? I trust my money with folks who aren't going to spend it on organizations & bullshit that's going to commit fraud, destroy entire industries-what's left of them, anyway-and generally dilute the one Constitutional Power I hold most sacred...That of my vote.

Republicans aren't out to do shit like that in my opinion.

But please don't get confused & think that I like them...They spend money like crazy...and they are still a huge problem...DC is really a black hole, to be honest...but, if you're looking for an answer...

I trust Republicans not to steal my money and spend it on things I don't agree with.

I trust Democrat(ic) politicians to spend money on policies, groups, & issues that lessen my "life, liberty & pursuit of Happiness".

Sorry.

By Blogger GO, at 3:51 PM  

Ok, perhaps you could've been charitable, GO, and said "I dont have a 401k, and while I'm too smart to rely on it, all things being equal, I'd prefer higher returns. Still, I don't trust the statistics over the past 100 years, and think the correlation you pointed out, while astounding and undernoticed, isn't based on policy. Democratic presidents just keep getting lucky, I suppose."

Then I'd ask you why Wall St. treats "industry-destroying" Dems so well. But I don't expect you to answer that query, either.

You seem to have an issue with federal expenditures and "stealing my money", which I take to mean taxation. If you read the "demonstrably superior" link, there are some facts to chew on... tax rates under GOP and Dem administrations are both in the eighteen percent of GDP range, but for some reason on avg Dem administrations have LESS federal spending/GDP (real dollars), even when you take out defense spending. That an organization that's received all of two to three million a year since 94 is even mentioned shows that the "trust" you have in the GOP is based on emotion rather than the numbers. You might've mentioned the 300 billion dollar farm bill passed under Bush, or Bush's trillion dollar Medicare bill or the trillion dollar misadventure in Iraq (most of which was deficit financed), but it looks like 3 million per year on Acorn outweighs all that in your decision-making.

Do you have any factual basis for the rhetorical puke in the last two sentences... or were those claims just an attempt at comedy?

By Blogger oyster, at 9:19 PM