Posted by
Bill Crawford on Thursday, February 12, 2009 3:59:26 PM
The stock markets are not political animals. They have anthracite hearts and vote with the money. You have no choice when you are working with OPM (other people's money).
The stimulus plan is effectively public in it's near final form. There are few surprises left. The Treasury plans for TARP are on the table, in their pathetic still born state.
The Dow sticks around the 7700-8100 floor that it has held since the reaction to the Lehman Brothers failure went down five months ago. If the plans are so well devised and good for us all, where is their confidence in this great new administration?
This White House follows it's disdain for supply side economics with a micro-managing mentality and a dabbling in the old Keynsian thoeries of aggregate demand that have been playing out in the more liberal econ schools since FDR.
Obama, like Clinton, thinks any talk of tax cuts should be topical, targeted and time-limited. They don't understand that the players in the market, just like all the families out there, don't make any long term decisions on short term stimulus. A family that gets a one shot rebate of $1000 in taxes will couch them conservatively. The same family that gets promised that much every year until the law changes again will then have the confidence to create the demand that Obama is hoping for.
The same goes for how the market reacts to structured changes in the capital gains tax. Long term changes beget long term plans. Uncertainty breed cash hoarding.
The market will continue to sit on their cash positions until they know where this White House ends up in policy. Only then will the stock market rebound and the credit markets loosen up significantly.