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  • musketeernumberone musketeernumberone Mar 3, 2009 3:35 PM Flag

    Obama and the Markets

    I've got a bunch of stocks up 5-10% ... Guess Obama is doing a good job today. LOL.

    But seriously, this notion that the President, who's basically done nothing so far, is moving the markets is absurd. He's no more responsible for a day like yesterday - when he did nothing - than he is for today.

    There is nothing that can be done now to avoid a long and deep recession. It's here, now. Do the right things and it might be shorter and shallower. Do the wrong things and it will be longer and deeper. But it will end... We voted this guy in because he seemed honest, smart and well intentioned. We need to let him do the job we voted him to do.

    The stock market looks like it's bouncing along a bottom, which is not to say we can't go significantly lower. But, cyclical stocks (like PBR) have had, and maintained, a powerful rally off Oct-November lows and that's good.

    American democratic capitalism is the best system around to promote individual freedom and wealth because it is flexible and, to some degree, self-correcting. A period where we strayed a bit to far into "laissez-faire" is - with much pain - correcting. We need to move beyond the "coddle the rich and large corporations" Republicanism of Bush & Co. and find a way that is more fair, more inclusive, less intrusive, less corrupt. The rich will have to pay for much of the mess, because nobody else had the dough. That's not class warfare, that's reality.

    My last political post (yeah, right...)

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    • Musk, there were some really good blog posts by Matt Taibbi who is my favorite reporter. You gotta love a guy who was so bored at a John Kerry press conference he showed up in a gorilla suit.

      Anyway, he has been echoing how I felt about how poorly the Obama economic team has been doing. The only one who has lived up to my expectations, even though she has really done nothing yet is Mary Shapiro, the SEC chief.

      There were two really good posts here. The first is the end of the Obama Honeymoon which shows the Obama economic team is as sleazy as Bush's was. See the link: http://trueslant.com/matttaibbi/2009/04/09/summers-raked-in-27-million-in-speaking-fees-from-wall-street-44-washingtonpostcom/

      So besides the best piece on the current mess we have in the Obama treasury Dept., he also wrote what I thought was the best piece on how we got as screwed up as we are today here: http://www.rollingstone.com/politics/story/26793903/the_big_takeover

      What was interesting to me is the commentary in the blog where because of the Rolling Stone piece someone attacked him for being a left wing hack.

      "Truth be told, we had to work extra hard to avoid seeming biased — against the Democrats. Of all the various laws and acts that played important roles in furthering the crisis, it was Glass-Steagall in 1999 that had the greatest influence, and we noted that it passed 90-8 in the Senate with the support of key Democrats like Kerry, Edwards, and Daschle, to say nothing of Bill Clinton and his key advisors Robert Rubin and Larry Summers (for those who didn’t buy the magazine and only read the piece online, the magazine has a sidebar that explains Rubin’s role in detail). Moreover I put in a lengthy passage in there about how the Democrats’ post-Mondale decision to become more “business-friendly” and accept Wall Street’s money, and then subsequently to aid and abet in the deregulation campaign, was a crucial development in the disaster. Moreover in the end we pointed out that there has basically been no difference in policy between Tim Geithner and Hank Paulson.

      The whole point of the story is that this disaster is not a partisan political issue. In fact this crisis has revealed the whole “red-blue” argument to be a sort of grotesque media-created diversion. The reality of our political system is that we are divided into two classes, connected and not connected — and what happened in this crisis is that those who were connected paid a fortune to change the rules to enrich themselves, then used that same influence to bail themselves out when they destroyed the economy.

      The “connected” in this story are BOTH Democrats and Republicans. The mainstream members of both parties were wholly complicit in this process at every step of the way. Interestingly, both parties had populist dissidents (ie Ron Paul and Dennis Kucinich, and one could also count Bernie Sanders, who caucuses with the Democrats) who were ignored by their own party leaders but were proven to be mostly right about this stuff all along. The common thread in all of this is that those politicians who had access to Wall Street money pushed for rapid deregulation. It had nothing to do with left or right, red or blue.

      But what I got from studying all of this and what we put in the piece was that this disaster was a completely bipartisan effort all the way. It’s the central point of the article. I mean, sh1t, I miss the days when we could blame everything on Bush. This is a heck of a lot scarier."

      What we have in today's media is basically a group of people putting out stories corporate America and people in the government want out there. I love a reporter who reads the party lines and can cry out, "Hey, that's bullsh1t." Musk, I think Matt Taibbi may be the only honest political reporter out there or at least the only honest one I have found.

    • Obama is the Man! Geitner really gets it! These guys are doing everything right.

      Where are all those foolish, republican nay-sayers now that the markets have figured it out? Do you guys even know which way is up?

    • Agree... As noted previously, these things are cyclical... the pendulum overshoots in one direction and then overshoots in the other. To some degree this is the nature of a "self-correcting", homeostatic process.

      The good news is that, as investors, we can count on things over-correcting... which creates all kinds of opportunities... it's the very essence of "buy low, sell hi" as an investment approach.

    • <P.S. I'm just stirring the pot.>

      Glad to hear it, Musk. FWIW, the Geitner/Obama plan is doomed to fail. The recent move up is a sucker/Bear Market rally, and that includes banks and most other stocks including PBR. And no, Fred and Winny, I am not short PBR at the moment.

      The first problem with the plan is the value of the assets, http://ftalphaville.ft.com/blog/2009/03/25/54003/the-tabular-banking-ppip-disconnect/

      And the second is selling the assets at a proper valuation, http://www.businessinsider.com/henry-blodget-one-small-problem-with-geithners-plan-it-will-bankrupt-the-banks-2009-3

      I don't get what the jumping for joy was about on Main Street. Wall Street hedge funds are going to borrow money from people on Main Street to buy bad loans bought from idiot banks. Main Street is getting it in both orifices; it is worse than AIG.

      Of course, the big bank executives have whispered to Republicans that they don't want the government taking them over. And the one thing the Republicans are good at is bogey phrases like "terrorists, socialized medicine, and now nationalized banks." They want our money but not for us to have any power. This is the Republican version of a free market: private gains, public losses.

      All I can hope for is that Obama's plan is to see that this one like the one for AIG falls on its face and he can finally turn to the Republicans, "Unless you guys have better ideas, okay if we nationalize the banks now?" That is what I am hoping for Musk, but from what I have seen Obama is as clueless as Republicans.

      Yep, that is what is politically correct. Wait for your opponents ideas to blow up before doing what works. Yeesh.

      I'm not sure I need to get into it, but Elliott Spitzer's warrantless wire tap was obtained thanks to the anti-"terrorist" Patriot Act. Medicare and Medicaid are "socialized medicine" and enjoy a much better reputation than their purely capitalist cousin, the HMO.

      The point of all this is that the exuberant run PBR has just had is not sustainable. Seeing PBR spike the same day as airlines did should have been a clue to everyone that all that happened was money left from cash and t-bills and came into stocks.

      The dollar went lower as there was less demand for cash and the Real and oil went higher, but it will come back.

      I think the funniest thing about this is that Obama keeps saying if we just fix the banks all we be okay. I watched Nouriel Roubini, the only economist who has been right about anything, on Bloomberg, and he cut right through the bs.

      American household debt:equity has gone from 100% to 140%. The average American has figured out they have been lied to, that the stock market is a scam, and that instead of borrowing they need to start saving. NR says the savings rate has gone from 0 to 5%, which is hugely positive for the dollar. Even if he is access to loans, the typical U.S. consumer is not going to buy a new house or car right now at least not like he was two or three years ago.

      This isn't 2004 when the dollar's demise was easily predicted. Cash is king, and demand for it is at an all time high. You can't have this much demand for the dollar and it not get stronger. Everyone is focusing on the government's printing $3 trillion and not that U.S. household's have lost $11 trillion, and that $11 trillion number is likely to get bigger.

    • Hey, Doc. Nice to hear from you... been a long time.

      Good stuff, especially this: "This is the Republican version of a free market: private gains, public losses. "

      I believe...

      - we've seen the bottom of the stock market and that the real economy is starting to stabilize.

      - the markets will gyrate wildly in relation to forthcoming policy initiatives/announcements... in addition to the economic headlines.

      - I love it when you say the Administration is not doing enough but also feel more comfortable with a marginally effective incremental approach vs. a "radical" gamble on the nationalization of the financial system.

    • Understand. You're successful at stirring the pot. I get frustrated at pointing fingers only at one or the other parties (and I don't mean just you - at least you're civil). They all contributed to where we are; and it's been heading here for more than the last eight yrs. So, the cyclical is compounded by the broke.

      I also realize I need to 'preview' my messages before I post. I get a little confused looking at my last few posts.

      By the way, did you delve into the financials?

    • <I love it when you say the Administration is not doing enough but also feel more comfortable with a marginally effective incremental approach vs. a "radical" gamble on the nationalization of the financial system.>

      Nah, Musk, I am more comfortable with complete nationalization of all the bad banks, nursing them back to health, and breaking these big banks into small pieces and selling them on the open market. "Too big to fail" banks that are solvent need to be broken up. We can't have individual companies in positions to bring down the whole economy. It is ridiculous for this to have been allowed to happen.

      As a taxpayer, I want ownership not this public-private partnership bs we have now. Whether Obama has plans for this to happen (and if he truly is clever he would) is irrelevant. That is what is going to happen. The longer we prop up half dead banks the longer we stay in the gutter.

      But the market got what it wanted, namely another shot at fleecing the taxpayer with this Geitner/bad asset plan.

      People calling for a bottom puzzle me. Bottoms don't feel this good. The banks have led this rally, but they own mortgages and commercial real estate, and these items continue to go down in value. One CNBC guy said the house is still burning down but more slowly now. Before you call a bottom IMO that fire has to be out.

      And no sooner did I get this post out, Dr. Doom is seeing the same things I am, http://www.bloomberg.com/apps/news?pid=20601084&refer=&sid=aCvWs8KIIsUo

      <I've noted a burst of new automobile purchases among co-workers.> That is because they are giving said cars away with 0% interest again. This morning, Best Buy reported a strong surge in sales, and Circuit City reported... Oh wait, they are bankrupt. Talk about a left handed report!

      "and who are patriotic are thinking this is a good time to buy something." Donald Rumsfeld would be proud of you.

      "Some of them reported buying Fords, which probably should not count as "durable goods" Fred, I nearly had my Coke spray out my nose when I read that one. But seriously, the Fords do two things well, build cars and winning football teams. I wonder if one day a judge is going to label community service attending a Lions game and how many prisoners would opt out and pick up trash instead.

      <Indeed, why let a crisis go to waste? Wouldn't now be the time to dismember these firms and cast aside what we don't need?>

      Winny, truth be told, I finally heard the first real positive news about the market I have for a while from new SEC chief Mary Shapiro. You can read her statement here, http://www.sec.gov/news/testimony/2009/ts031109mls.htm

      Geitner made similar remarks as well. "Top policymakers are considering creating a powerful systemic risk regulator with the authority to look deep into financial firms other than banks, such as hedge funds and private equity companies. There is some agreement among lawmakers and the Obama administration that one regulator is needed to keep tabs on risks that could threaten the entire financial system."
      "Responding to Democratic requests to give shareholders an easier way to nominate corporate board directors, Schapiro said the SEC may act on "proxy access" as soon as May. She reiterated support for giving shareholders more say on executives' pay."

      Jayzuz, it is about time. There is nothing that could make me happier than seeing the limp d1cked SEC be obliterated off the face of the earth. If Obama does that, Musk, I'll put on the Obama cheerleader outfit you have on, my hairy legs and all. This is the first real reform I have read about that is worth a hill of beans. Hopefully, there will be some action behind these words.

    • Actually I will be very scared if these bear turn bull now.

      Fear is good for the market. Always go against how the herd thinks. -:)

    • P.S. I'm just stirring the pot... This whole thread started with the observation that Obama probably can't influence the markets all that much... so the Administration is no more responsible for the up days than the down days...

      "But seriously, this notion that the President, who's basically done nothing so far, is moving the markets is absurd. He's no more responsible for a day like yesterday - when he did nothing - than he is for today."

    • The excellent Roubini video:
      http://www.youtube.com/watch?v=ai4ZsA7c9qI&feature=related

      There was also this scary piece by Nassim Tableb author of the Black Swan and his mentor about where we go from here, http://www.youtube.com/watch?v=DLFkQdiXPbo&feature=related

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