How will/should Obama (possibly) change course because of the big market drop?

[SteveG1]

@Leaper

Perhaps, but as I said in the other thread mentioned in the OP, there are already a lot of people declaring the stimulus, and Obama’s approach, a failure because “the market declared it a failure” with the massive drop. That’s a lot of pressure to change course, or do SOMETHING else/different, RIGHT NOW. Thus my OP.

If the president does that, then he has failed. You can’t make a change or start a new program, and then change it just like that. It’s impossible. You can’t start a stimulus package, and then say it failed, before it even got started. I would go so far as to say that the people calling for a change RIGHT NOW, would probably be the same people who wanted it to fail anyway, for purely political reasons.

Say it is failing.
Try to make that a self fulfilling prophecy
Bring pressure to bear, so it gets scrapped.
When it is scrapped, tell people “See that? It failed”.

I don’t buy it. Not at all.
Maybe the catch phrase should be something like “We’ve turned the corner on the economy”.

[yorick73]

@Voyager

Maybe I missed it, but I’ve heard him use the unemployment rate as justification, and the foreclosure rate as justification, but not the price of the Dow.

I was referring to the overall state of the economy…poor choice of words on my part.

@Voyager

It is possible to acknowledge that something is being done for the right reasons even if you think it is the wrong thing to do.

I agree that it is possible. I just don’t believe it is true. Do you really believe Obama and company really think that nationalizing health care or limiting offshore drilling are going to help the economy…even over the long run? Do you really believe Obama thinks the bloated budget that was submitted will help the economy…or just grow government? He has goals in mind and he intends to use the downturn to push through his agenda…economy be damned (IMHO)

@Voyager

The perilous state of most of America is the result in policies that increased the income gap, and caused middle class wages to stagnate while the rich made out fine. Solving this fundamental problem is at the heart of a lot of the things you don’t seem to like. It’s a major break from the last 30 years so of course it is radical, and investors, who are disproportionately a part of the top, don’t like it.

This is boilerplate class-warfare nonsense. You do realize that people can and do move between income quintiles all the time. The poor are not destined to stay poor forever just as the rich can lose it all. If the richest of the rich got richer does that impact you in any way? Are they stealing money that you would have had? Do you have less because they have more? Do you really believe a company that limits the size of a CEO’s salary will give it to employees?

[Happy_Fun_Ball]

@Clothahump

He should scrap the incredibly bad joke called a stimulus package and have the Treasury Dept. cut a check for $5000 to each taxpayer that filed a return in 2008. Put the money where it needs to be - in the hands of people that will spend it. That will restart the economy, not his pork barrel bill.

I don’t know about President Obama’s “pork barrel bill”, but I don’t think your idea would work. If my wife and I (who are easily in the to 15% of households) got a $5,000 refund from the government, we would bank it. (Note: bank it, not invest it. All our investments have lost us a lot of money in the last year. I might sink it into government bonds, commodities, or property, but I sure as hell would not invest it in any businesses I know of… YMMV)

[Magiver]

GM did indeed slide below $2/share. The response from Obama was to drive a $65,ooo/hr limo to Columbus Ohio today to spotlight the 25 jobs rescued as a result of the trillion dollar stimulus package.

The networks already promoted the event with interviews of the newly hired so why does he have to waste his time (and our money) with another campaign stop? In a time of severe economic crisis he is flying all over the country for non-events. Did he really need to fly to Denver to sign the stimulus package when the Rose garden is a convenient and traditional stage for announcements?

His message needs to have less gilding around the edges to be taken seriously. Right now his message has all the sincerity of “let them eat steak (wagyu)”.

[Marley23]

@Jimmy_Joe_Meager

Won’t that take, at very least, months? (Many, many months?)

Yes. Scrapping a plan before you even give it time to work is just impatience, and poor management. Is there any course of action that would turn the economy around in a matter of weeks?

[DSeid]

deleted - wrong button pressed. sorry.

[DSeid]

More on how to judge when something is working, since the stock market is not a good measure.

Well we can look at quarterly GDP. Last year it went from+2.8% in the second quarter to - 0.5% in the third and - 6.2% (recent revision) in the fourth. So Obama came into a ship that was plummetting downward fast. I’ll judge amazing success if the rate of decrease starts to level off this quarter and if by next year it is back to positive. Better than that is not realistic and a rational stock market (as if) should be reflective of that reality.

Is the GDP even adequate though? Some think not and sugggest that measures that add in other quality of life metrics such as the AHDI:

The American Human Development Project [AHDP] was founded in 2006 and is modeled on the U.N.’s global Human Development Report. The AHDP’s American Human Development Index [AHDI] combines indicators for the three domains of a long and healthy life, access to knowledge, and a decent standard of living.

By that sort of metric a new healthare plan and investment in education may be more important.

[Magiver]

@DSeid

More on how to judge when something is working, since the stock market is not a good measure.

Well we can look at quarterly GDP. Last year it went from+2.8% in the second quarter to - 0.5% in the third and - 6.2% (recent revision) in the fourth. So Obama came into a ship that was plummetting downward fast. I’ll judge amazing success if the rate of decrease starts to level off this quarter and if by next year it is back to positive. Better than that is not realistic and a rational stock market (as if) should be reflective of that reality.

The stock market is reacting to a lack of credit. The banks are not solvent and until they are nothing else matters.

[DSeid]

538’s take on what the stock market is saying is, as Nate’s analyses usually are, an interesting read.

The short version is that the most predictive ratio of the market is the relationship of the share prices of consumer discretionaries to consumer staples, which he calls the Cyclical Expectations Index (CEI). And that ratio shows the market actually liking what they see.

… the CEI was much quicker to anticipate the current recession than the S&P 500, which didn’t shed any real amount of value until the recession was already well under way. But also unlike the S&P 500, the CEI has not been particularly responsive to events of recent weeks. On inauguration day, the CEI stood at 85.5; yesterday, it closed at 85.1 (although it’s closer to 83.6 as of midday today). The S&P 500, by contrast, has lost around 12 percent of its value over that period. And since Election Day, the CEI is down about 10 percent versus the S&P’s roughly 30 percent.

There is also some evidence that the CEI responded favorably to the stimulus package …

… All of this gives us a rather different perspective on what the stock market is really telling us about the broader economy. The CEI is down about 10 percent since Election Day, is up about 10 percent since the last day of trading before Obama announced his “aggressive” stimulus, and is essentially unchanged since Obama’s inauguration. The market is not becoming particularly more pessimistic about macroeconomic conditions (although it has certainly retained its previous pessimism) – if this were true, we’d see cyclical stocks losing further value relative to more economically robust ones. But that largely isn’t what we’ve been seen. Instead, the stock market is engaged in something of a pity party – the prevailing emotions being fear and loathing. It is concerned about policies which might be burdensome to equityholders in large corporations while perhaps nevertheless being boons to economic recovery.

[Happy_Fun_Ball]

@yorick73

I understand that the market was way down before Obama took office. But, the fact that the market has had such a negative reaction to Obama’s policies should give anyone pause.
The market is usually a bellweather of future economic strength or weakness and Wall Street does not believe that Obama’s policies will do anything to get us out of this mess. It’s not so much about the effect on people’s portfolios but what the market is predicting.

I now it is a little late to respond, but this quote bothers me. What evidence is there that the market is responding to President Obama’s policies? To me it look like the market was responding to economic conditions like unemployment rates, bank capitialization, sales figures, etc… In other words, cite?

[UltraVires]

I think the fault doesn’t necessarily lie with Obama per se, but with the idea that massive government spending and bailouts are the answer. In this respect, Obama and Bush were on the same course. Now, this year, we have seen that the multiple billion dollar payments to the auto companies and to the banks have not only not helped, these companies have gotten worse.

Wall Street is getting skittish thinking that instead of being well thoughted out, these government payments are just taking a shot in the dark at the economic problems and that nobody knows what in the hell is going on.

[Maeglin]

@L. G. Butts

I now it is a little late to respond, but this quote bothers me. What evidence is there that the market is responding to President Obama’s policies? To me it look like the market was responding to economic conditions like unemployment rates, bank capitialization, sales figures, etc… In other words, cite?

The market is also responding to minor little things like forward PE ratios. Given that there is little reason to revise the forward PEs of pretty much any major issue despite a large stimulus, I do not see why anyone should expect the market to change materially.

[Happy_Fun_Ball]

@Maeglin

The market is also responding to minor little things like forward PE ratios. Given that there is little reason to revise the forward PEs of pretty much any major issue despite a large stimulus, I do not see why anyone should expect the market to change materially.

I agree.

[Voyager]

@jtgain

I think the fault doesn’t necessarily lie with Obama per se, but with the idea that massive government spending and bailouts are the answer. In this respect, Obama and Bush were on the same course. Now, this year, we have seen that the multiple billion dollar payments to the auto companies and to the banks have not only not helped, these companies have gotten worse.

Wall Street is getting skittish thinking that instead of being well thoughted out, these government payments are just taking a shot in the dark at the economic problems and that nobody knows what in the hell is going on.

It is true the auto companies are not healed, but no one expected them to be, and they are still here, which was not at all certain for GM and Chrysler.

What do you think the market reaction would be if there was a change of policy and the administration announced that it was going to let AIG fail? Do you think the Dow would rise?

The market is scared, and expects things to get worse before getting better, and I don’t think anyone can blame them. Why not go down until the effects of the stimulus are seen? And they will be seen.

[DSeid]

Okay, so the market hit its low of 6477 near the end of trading last Friday and since then is up over 10%. Will Cramer and the other pundits now be out there screaming about how the market is now endorsing Obama’s last several days of policy statements and how it foretells so well for the economy at large? It seems that they have to if they are to be consistent …

Cramer is to be on The Daily Show tonight. This should be good.

[gonzomax]

http://www.tolerance.org/images/teach/activities/tt_wealth_tables.pdf Since 1 % of stock owners own about half the stocks ,it is surely a boom to the rich when the market climbs. It is ultimately a playground for the rich ,who have the power and size to shape the market.