Posted by
Bill Crawford on Friday, November 14, 2008 10:17:56 PM
It sometimes seems like the beginning of a Barnum & Bailey's show every time the NYSE bell rings at 9:30 in the morning. The beat up Volkswagen comes out, the hordes of dancing midgets emerge and everybody staring at the Dow numbers breaks into a sweat.
Lesson number one: the Baby Boomers, unlike their Depression parents, were born comfortable with the stock market. It is where the bulk of their retirement money is. There isn't a better producing alternative for it in the long run. What comes out will go back in, absent any immediate liquidity needs.
Lesson number two: there are reasons why the numbers see-saw like they do. One big one is that the brokers and the fund managers aren't the only ones playing the game day by day. Everybody with a brokerage account learns the history, and it is common wisdom among them that falling markets bottom out 40-50% below the peak, and many put computer generated buy triggers around that level. That is why the market keeps falling towards 8000 and jumping up again. Also, most fund managers place their cash out orders around 2-2:30PM, so expect some craziness then, followed by a final settlement for the day.
Three: I wanted no part of Obama, and my heart wanted him to lose, even when my head was telling me he wasn't going to. The players in the market have anthracite and bituminous hearts, and they bet their horses on Obama within two weeks after Lehman Brothers took on the formaldehyde. Part of the downturn, and it's inability to reverse out, is the uncertainty of where he is going, along with a good guess that some things are going to make market investment suck eggs.
This would include:
Raising the capital gains tax not to a predictable level, but to one that Mr. Obama thinks is "fair" on a given day.
Letting the Bush tax cuts die in 2010.
Not doing anything about the pernicious Alternative Minimum Tax, because the feds need the money.
Openly musing about the environmental constructivity of high energy prices.
Making the recovery process (starting with the $750B) another earmark process for Democrats.
This makes investment a more difficult game, but not an impossible one. Wall Street, and your 401K, would survive Karl Marx, once the investors had some sort of handle on Marx's predictability, so they had an idea of where to go.
That is the danger of Obama. It is that he has built a movement based not on a specific set of ideas, but on whatever he thinks is the best idea today. Anybody who wanted a handle on Reagan's impending direction in 1981 could get a damned clear idea from reading his speeches to that point. You can't do that with Obama.
But the market will continue, and the only question is, will the new President create a semi-socialist sludge, or get out of the way enough for another boom to take hold? Either way, your stock situation in 2015 will be appreciably better than it is now.
One way or another, we will find a way to clear up the damage wrought by the bad mortgages, even though the three Senators most responsible for the mess will get off scot free: Chris Dodd, Barney Frank and......Barack Obama.