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Obama killing the economy and stock market? Huh?

After reading several threads about Obama being in office for about 7 weeks, and how he's somehow able to have destroyed the stock market and effectively tank the economy all by himself (or at least the large majority of fault is his), I think we need to back up and see exactly what led us to this point first:

(shamelessly stolen from http://www.dailykos.com/story/2009/...4877/572/706261):

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One of the more ridicules statements going around over the last few weeks is "this is an Obama bear market." This statement is, well, ill-informed at best and fraudulent at worst. Let's look at why. First -- who is saying this? Such economic luminaries as John Hawkins at Right Wing News (who actually asked Is Obama Deliberately Tanking the Stock Market?), Powerline, Brit Hume along with a host of other right wing bloggers. What all of these people have in common is their incessant chearleading during the Bush years despite mounting evidence of an upcoming recession. There are the same people who argued that ... housing is a small part of the economy ... most people are paying their mortgages ... the US economy will decouple from the rest of the world .... it's the greatest story never told ..... you get the idea. Simply put, these are people who have distinguished themselves by being some of the best contrary indicators around. Secondly, the SPYs -- the tracking ETF for the S&P 500 -- dropped from (roughly) 155 in the summer of 2007 to (roughly) 85 at the end of last year. Yet I don't remember any of them saying that was the Bush bear market -- even though that's a drop of roughly 43%. No -- it's the new President that's causing the problems. In addition, when Bush took office the SPYs dropped from roughly 130 at the begging of 2007 to 85 in the fourth quarter of 2002. Yet somehow I don't think any of them blamed Bush's policies for the drop. Then it was the "lasting effects of the Clinton recession" or something similar. What all of these idiots are forgetting is the simple fact that the economy is the backdrop of the stock market. When the economy does well the stock market does well. When the economy doesn't do well, the stock market doesn't do well. And to that end, the economy isn't doing well right now. Let's look at some recent news events. [QUOTE]Real gross domestic product -- the output of goods and services produced by labor and propertylocated in the United States -- decreased at an annual rate of 6.2 percent in the fourth quarter of 2008,(that is, from the third quarter to the fourth quarter), according to preliminary estimates released by theBureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent. http://bea.gov/newsreleases/nationa...newsrelease.htm

GDP was dropping like a boulder last year. If memory serves, I do believe Obama wasn't quite in office yet.

February 2009 employment rate:

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Nonfarm payroll employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment has declined by 2.6 million in the past 4 months. In February, job losses were large and widespread across nearly all major industry sectors. http://www.bls.gov/news.release/empsit.nr0.htm

Yeah, I know, Obama was already in office then, and he could have easily turned things around in just under 2 weeks if he really wanted to. Dang.

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Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February. Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies "remained weak." The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions. Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. Consumer spending remained sluggish on net, although many Districts noted some improvement in January and February compared with a dismal holiday spending season. Travel and tourist activity fell noticeably in key destinations, as did activity for a wide range of nonfinancial services, with substantial job cuts noted in many instances. Reports on manufacturing activity suggested steep declines in activity in some sectors and pronounced declines overall. Conditions weakened somewhat for agricultural producers and substantially for extractors of natural resources, with reduced global demand cited as an underlying determinant in both cases. Markets for residential real estate remained largely stagnant, with only minimal and scattered signs of stabilization emerging in some areas, while demand for commercial real estate weakened significantly. Reports from banks and other financial institutions indicated further drops in business loan demand, a slight deterioration in credit quality for businesses and households, and continued tight credit availability. http://federalreserve.gov/fomc/beig...304/default.htm

(side note - awesome time to buy a house - my wife and I just got locked down at 5.125% today).

Finally, from the FDIC:

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Expenses associated with rising loan losses and declining asset values overwhelmed revenues in the fourth quarter of 2008, producing a net loss of $26.2 billion at insured commercial banks and savings institutions. This is the first time since the fourth quarter of 1990 that the industry has posted an aggregate net loss for a quarter. The ?0.77 percent quarterly return on assets (ROA) is the worst since the ?1.10 percent in the second quarter of 1987. A year ago, the industry reported $575 million in profits and an ROA of 0.02 percent. High expenses for loan-loss provisions, sizable losses in trading accounts, and large writedowns of goodwill and other assets all contributed to the industry's net loss. A few very large losses were reported during the quarter-four institutions accounted for half of the total industry loss-but earnings problems were widespread. Almost one out of every three institutions (32 percent) reported a net loss in the fourth quarter. Only 36 percent of institutions reported year-over-year increases in quarterly earnings, and only 34 percent reported higher quarterly ROAs. http://www2.fdic.gov/qbp/2008dec/qbpall.html

I think it's also worth pointing out Occrider's posts here and here, and asks those against Obama's policies to try and wait for more factual data before condemning his policies (i.e. come back to reality for a moment).

Things were shit before Obama came, and they were well on their way to becoming even shittier - and nothing about Obama's policies had anything to do with that. You want to wail and moan about what this Administration is doing to the economy and the stock market? Then please tell us your gripes and incessant rants about what the Bush Administration did and why all those wonderful Conservative "economists" on blogs and elsewhere decided to sit by the sidelines and watch it all crumble down. The double-standard is fun, but it doesn't go unnoticed.

Until then, let's wait a little while longer to see if there's any impact at all, positive or negative.

This is why I still lurk here, great posts like these!

quote:

Things were shit before Obama came, and they were well on their way to becoming even shittier - and nothing about Obama's policies had anything to do with that. You want to wail and moan about what this Administration is doing to the economy and the stock market? Then please tell us your gripes and incessant rants about what the Bush Administration did and why all those wonderful Conservative "economists" on blogs and elsewhere decided to sit by the sidelines and watch it all crumble down. The double-standard is fun, but it doesn't go unnoticed.

+1

but I am still worried....

Hey Opus--the market looks forward, not backward! The gripe isn't that the plan is killing the market, rather it's more along the lines that the plan is long on spending and short on details and is heavy on welfare and wealth transfer and light on real stimulus. In short, it's half-baked and the market players aren't biting. Just sayin'.

Re: Obama killing the economy and stock market? Huh?

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Originally posted by MisterOpus1 After reading several threads about Obama being in office and nothing about Obama's policies had anything to do with that.

True, his policies haven't had any effect yet but sentiment can be way ahead of the curve. All this talk about "carbon credits" (invisible tax hikes on energy companies) along with higher capital gains and income tax rates has definitely put a damper on investor sentiment. Markets react to what they believe the future will be like...and what people perceive is an unfriendly climate for the investor/business class in the coming years.

Hard-line conservatives want what the Democrats had in being able to blame Bush (justly) for the decline of this country.. Amusing..

I feel his announcements over the past weeks HAVE indirectly resulted in market dives. I feel if he had made different choices, the markets would have reacted positively. I am not happy about this.

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Originally posted by delobbo I feel his announcements over the past weeks HAVE indirectly resulted in market dives. I feel if he had made different choices, the markets would have reacted positively. I am not happy about this.

Can you demonstrate with supporting evidence a causation rather than a correlation in your contention here? Because I think I could say the exact same thing except replace "his announcements" (pertaining to Obama) with "economic indicators", "unemployment rates", etc. that demonstrate more of a direct causation to the market diving rather than what Obama has been saying.

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Originally posted by Shakka Hey Opus--the market looks forward, not backward! The gripe isn't that the plan is killing the market, rather it's more along the lines that the plan is long on spending and short on details and is heavy on welfare and wealth transfer and light on real stimulus. In short, it's half-baked and the market players aren't biting. Just sayin'.

That's a fair point. I would also like to hear more details on the stimulus plan. I think that problem is shared with people on both sides of the aisle.

quote:

Originally posted by MisterOpus1 Can you demonstrate with supporting evidence a causation rather than a correlation in your contention here? Because I think I could say the exact same thing except replace "his announcements" (pertaining to Obama) with "economic indicators", "unemployment rates", etc. that demonstrate more of a direct causation to the market diving rather than what Obama has been saying.

if you don't "see it" the way I (and many others) do, I don't think I'll have any success in convincing you, regardless of what I write.

ps. I voted for O.

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Originally posted by delobbo if you don't "see it" the way I (and many others) do, I don't think I'll have any success in convincing you, regardless of what I write.

On the contrary, I'd be happy to "see it" just as you do, but you're going to have to do more convincing than merely tell me that I need to "see it" like you and so many others. Some evidence to support your contention would be good at this point. I provided evidence that things were well on their way without any involvement of Obama, and I would contend that regardless of who was in charge now things would have continued to dive in a very similar, if not identical fashion as they are now.

quote:

ps. I voted for O.

Awesome.

I like hot wings.

OBVIOUSLY, we can't PROVE with evidence what would have happened if other decisions were made. But I don't think O's decisions are helping the confidence level of markets, businesses, consumers, and the country as a whole.

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Originally posted by delobbo OBVIOUSLY, we can't PROVE with evidence what would have happened if other decisions were made.

That wasn't my question. I was asking if you could demonstrate with verifiable evidence a direct causation between Obama's policies and/or statements and the markets tanking as of late. IOW, make a connection between actual decisions made now with evidence to support your contentions.

quote:

But I don't think O's decisions are helping the confidence level of markets, businesses, consumers, and the country as a whole.

This may be true. However it may be equally true that what's occurring in the markets are a direct result of what was laid right in front of Obama just before he came into office. I would state that since the markets tend to follow the situation of the economy (like the author of the article mentioned above), this is more likely than the markets tanking at anything Obama is saying at this point. We're both speculating on this, but I am attempting to support my speculation with evidence.

However what is not speculation is the fact that things were headed the wrong way at a very accelerated rate before Obama took office, and he cannot be put to blame on the state of that acceleration as a result (at least not until we actually see some evidence of his stimulus taking place in a positive or negative fashion).

First, I'm getting tired of the inability to read/understand what's being said about this topic. No one is saying that Obama destroyed the market. They're saying that the he's taking a crippled market and either a) is not making it better or b) making a bad situation worse.

That Kos article is a prime example of why I can't go onto that blog (and it's been spreading to HuffPo). It's full of completely incorrect information, like saying that the only people saying these things are right-wing cheerleaders during the 2000s. I'm saying it, and I was hardly a right-wing cheerleader a few years back. Also, it is a factual statement that Obama has its own bear market. We are down over 20% from inauguration, which is the technical definition of a bear market. Everyone knew Bush had a bear market, because he'd been there from the top. It's a rather obvious statement and was made constantly last year when we were headed down.

quote:

Originally posted by MisterOpus1 Can you demonstrate with supporting evidence a causation rather than a correlation in your contention here? Because I think I could say the exact same thing except replace "his announcements" (pertaining to Obama) with "economic indicators", "unemployment rates", etc. that demonstrate more of a direct causation to the market diving rather than what Obama has been saying.

Look at policy announcements and the hourly or daily charts. Particularly the lack of a bank plan when Geithner came out in early February and gave no details after Obama touted how he didn't want to steal the thunder by providing details. The market tanked (and didn't let up) after that announcement.

I mean, it works both ways. When Bernanke said it was possible for us to be seeing improvement in 2009, we rallied a little, until everyone realized it was a ridiculous notion.

For me, the big thing was the budget. It took wavering confidence in the administration and added doubt about the administration's pragmatism. It's not the change from 36 to 39% in the top rate, it's cutting the deductions to charities and, most importantly for this crisis, mortgage deductions for the top earners. It just doesn't send a good message to investors who already want to hoard their money for the worst when we need them to be spending and investing it.

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Originally posted by Groundhog Boy First, I'm getting tired of the inability to read/understand what's being said about this topic. No one is saying that Obama destroyed the market. They're saying that the he's taking a crippled market and either a) is not making it better or b) making a bad situation worse.

Great point.

And just to play devil's advocate, Opus. Whose fault (if any) is the 80% drop the Nasdaq (and 50% in the S&P 500, 40% in the Dow) saw from 2000 to 2002? I don't think these discussions are helpful.

We are wringing out the excesses of at least 20 years right now and there is not a ready and apparent bubble to pick up the slack like housing and easy credit picked up after the last recession. It's nasty, but there is lots of blame to go around on all sides, starting with Greenspan (who yes, was a Reagan appointee).

quote:

Originally posted by Shakka Great point.

It's really frustrating and I'm finding it everywhere. How can you have a debate with someone when they don't even understand the question being debated? Just take a trip over to Digg and read the comments on any business news over there. It's mindblowing.

It's also frustrating that he clearly has the INTENT to help the economy, I mean he has been saying that for how long, yet he is not making decisions that reflect that intent.

What I meant earlier about "seeing it" is that, we are all following this on the news right? I mean, we are actively reading/hearing what's happening right? That being said, if you see the news about whatever policy or law or bill was passed or whatever and you can't see what effect it might have on public confidence (it's hard to not sound condescending here, although I really don't mean it that way), I really don't feel I can convince you otherwise.

I'm not a huge Cramer fan and I know he makes a ton of bad calls, but this is all sorts of correct.

For the life of me I can't understand why people are more fixated on the stock market than things like inflation, GDP, or unemployment - you know, actual macroeconomic indicators of an economy's health. I'm not saying that a declining stock market isn't a bad thing - it is. But it's significantly less important than a decline in consumer demand and GDP growth.

Josh Marshall is on point in explaining how the general consensus about the economy is now founded on a unhealthy obsession with the market:

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The financial sector has grown far out of proportion to the function it is supposed to serve in the economy (the efficient allocation of capital) and has, for what it's worth, demonstrably failed in that core function. This swollen and unhealthy condition has led to vast concentrations of money, which have in turn purchased great political power in Washington. As DZ says, not based so much on specific contributions or transactions or the purchase of people, but the purchase -- or at least the long-term leasing -- of minds, the basic mentality about whose interests are the key ones in the economy, how the economy is supposed to function and where its leadership should come from.

http://www.talkingpointsmemo.com/ar...nomy_stupid.php

For something that was created merely to allocate capital, we've grown far too accustomed with the notion that it somehow produces it.

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Originally posted by Lebezniatnikov For the life of me I can't understand why people are more fixated on the stock market than things like inflation, GDP, or unemployment - you know, actual macroeconomic indicators of an economy's health. I'm not saying that a declining stock market isn't a bad thing - it is. But it's significantly less important than a decline in consumer demand and GDP growth. Josh Marshall is on point in explaining how the general consensus about the economy is now founded on a unhealthy obsession with the market: http://www.talkingpointsmemo.com/ar...nomy_stupid.php For something that was created merely to allocate capital, we've grown far too accustomed with the notion that it somehow produces it.

you'd have a point, if inflation, GDP, and unemployment were improving. everything is tied together.

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Originally posted by Lebezniatnikov For the life of me I can't understand why people are more fixated on the stock market than things like inflation, GDP, or unemployment - you know, actual macroeconomic indicators of an economy's health. I'm not saying that a declining stock market isn't a bad thing - it is. But it's significantly less important than a decline in consumer demand and GDP growth. Josh Marshall is on point in explaining how the general consensus about the economy is now founded on a unhealthy obsession with the market: http://www.talkingpointsmemo.com/ar...nomy_stupid.php For something that was created merely to allocate capital, we've grown far too accustomed with the notion that it somehow produces it.

The stock market indexes ares a supposed combination of all of those items. The market's already priced in 10% unemployment.

If you look at the market reactions the day that unemployment comes out, it hasn't been that bad lately if it's in line with expectations. We've been shedding 600K jobs a month, but by the time it's announced, the market's already priced it.

As for Josh Marshall's thing, why should it be of so little impact? I mean, it's the primary investment tool of most Americans, having a great impact on their net worth. If this doesn't turn around soon, how is the Democratic Party going to tell union workers that their pension funds are wiped out because we didn't care about the "day to day fluctuations in the stock market," which haven't been fluctuating up, just down.

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Originally posted by delobbo you'd have a point, if inflation, GDP, and unemployment were improving.

Right, because we would expect GDP growth to instantaneously skyrocket in the time between when the stimulus was signed into law and the first dollars are disbursed...

You've lost me.

So wait, are you guys arguing what the progressives have been arguing? That the output gap is larger than anyone has thusfar come to terms with, and therefore the stimulus was far too small?

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Originally posted by Lebezniatnikov Right, because we would expect GDP growth to instantaneously skyrocket in the time between when the stimulus was signed into law and the first dollars are disbursed... You've lost me.

you made it sound like I was ignoring those 3 things - I'm just saying I'm not. that's all.

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Originally posted by delobbo you made it sound like I was ignoring those 3 things - I'm just saying I'm not. that's all.

I'm just saying that there's a culture in this country of pinning the entire economy on the Dow... and that's simply not an accurate snapshot. Obama isn't worried about putting in place policies designed to stimulate the stock market (or at least he shouldn't be) - he's looking to stimulate demand in order to prop up GDP growth and limit the rise in unemployment. That's how you rebuild the economy, and that takes more time than the seven weeks he's been given.

quote:

Originally posted by Lebezniatnikov I'm just saying that there's a culture in this country of pinning the entire economy on the Dow... and that's simply not an accurate snapshot. Obama isn't worried about putting in place policies designed to stimulate the stock market (or at least he shouldn't be) - he's looking to stimulate demand in order to prop up GDP growth and limit the rise in unemployment. That's how you rebuild the economy, and that takes more time than the seven weeks he's been given.

sure, and of course I will be happy if things start to get better. but these first few weeks have been dismal. mistakes are being made left and right. it's really disappointing.

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