NYC Letter: Obamanomics 104

UPDATE 03.03.09:

What I'm looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States -- and the entire world economy -- to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day [Demonstrates bobs with vertical finger slashes.]. Ah, and if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong.

President Obama,
pooh-poohing the evaporation of capital markets
PRESS INTERVIEW
WASHINGTON March 3, 2009 (MSNBC)

At what point does the day-after-day, week-after-week, month-after-month downward "day-to-day" cease being "up and down" bobbing and is recognized as the stubborn product of ruinous govenment policies? [Impatient pause.]

The market is not bobbing. It is tanking.

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Day 42 of CHOPE

Obamanomics, ignore capital markets.

DR. DOOM SAYS "DRINK THE CHOPE!"
And Like It!

Capital markets are volatile. The volatility corresponds to confidence in the economy, its ability to produce at a profit. If confidence is high, markets rise or soar; if low, markets decline or crash. There are usually a great many drivers throughout a cycle contributing to market performance, but great or sudden events can dominate and shape markets, for examples, a declaration of war or a humongous stimulus bill.

A stimulus bill is meant to quicken (scil., "stimulate") the productive economy. When properly conceived and crafted it has several distinct characteristics: it infuses the buying-end of the economy with substantial cash; it creates perduring jobs; its costs are limited; its effects are immediate; and it is itself impermanent. [Pause.] The recent stimulus bill is none of these. It is actually an omnibus appropriation bill, the largest in the history of the world.

This bill ran to 1,079 pages, went largely unread in the 13-hour run-up to its vote, and nominally costs out at $787B. Prior to the vote, the CBO weighed in at different points on the work in progress, remarking, et al., the economy by itself would largely recover before any stimulus benefit kicked in and warned that the tremendous government debt would result in a lower GDP over the next 10 years, suggesting the government doing nothing was better than the government jerry-rigging stimulus.

Not surprisingly, capital is getting out of the markets while the getting's good.

DOW FINISHES BELOW 7,000 FOR FIRST TIME SINCE '97

NEW YORK March 2, 2009 (AP) - A relentless sell-off in the stock market Monday blew through barriers that would have been unthinkable just weeks ago, and investors warned there was no reason to believe buyers will return anytime soon.

The Dow Jones industrial average plummeted below 7,000 at the opening bell and kept driving lower all day, finishing at 6,763 — a loss of nearly 300 points. Each of the 30 stocks in the index lost value for the day.

And the Standard & Poor's 500 stock index, a much broader measure of the market's health, dipped below the psychologically important 700 level before closing just above it. It hadn't traded below 700 since October 1996.

[Hat tip: JammieWearingFool]

THE WORST POISED TO GET WORSE
Another Notable Achievement
[Picture source: Suitably Flip]

Suitably Flip laconically remarks:

After 40 full days on the job, the Obama administration has achieved a singular feat - namely presiding over a 17.1% slide in the S&P 500.

Capital is not ideological. It is not party affiliated. Capital is indifferent to everything but its own preservation and increase. These are brought about by sound fiscal management. Capital is not fleeing the markets because it is anti-Obama. It is fleeing the markets because of government encroachments in the markets, unimaginable government debt, the impendent ruination of the dollar, and the abandonment of fiscal stewardship altogether.

Capital markets are leading indicators. As you read this today, dear skimmer, your world is largely unchanged. But calamitous forces are gathering.

CHOPE.

Down. Down. Down.

Posted by Damian at March 2, 2009 11:45 PM